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THE THREAT FROM INTERNATIONAL ORGANIZED CRIME AND GLOBAL TERRORISM
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
OCTOBER 1, 1997
Printed for the use of the Committee on International Relations
COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM GOODLING, Pennsylvania
Page 2 PREV PAGE TOP OF DOCJAMES A. LEACH, Iowa
HENRY J. HYDE, Illinois
DOUG BEREUTER, Nebraska
CHRISTOPHER SMITH, New Jersey
DAN BURTON, Indiana
ELTON GALLEGLY, California
ILEANA ROS-LEHTINEN, Florida
CASS BALLENGER, North Carolina
DANA ROHRABACHER, California
DONALD A. MANZULLO, Illinois
EDWARD R. ROYCE, California
PETER T. KING, New York
JAY KIM, California
STEVEN J. CHABOT, Ohio
MARSHALL ''MARK'' SANFORD, South Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York
TOM CAMPBELL, California
JON FOX, Pennsylvania
JOHN McHUGH, New York
LINDSEY GRAHAM, South Carolina
ROY BLUNT, Missouri
KEVIN BRADY, Texas
LEE HAMILTON, Indiana
SAM GEJDENSON, Connecticut
Page 3 PREV PAGE TOP OF DOCTOM LANTOS, California
HOWARD BERMAN, California
GARY ACKERMAN, New York
ENI F.H. FALEOMAVAEGA, American Samoa
MATTHEW G. MARTINEZ, California
DONALD M. PAYNE, New Jersey
ROBERT ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
PAT DANNER, Missouri
EARL HILLIARD, Alabama
WALTER CAPPS, California
BRAD SHERMAN, California
ROBERT WEXLER, Florida
STEVE ROTHMAN, New Jersey
BOB CLEMENT, Tennessee
BILL LUTHER, Minnesota
JIM DAVIS, Florida
RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff
JOHN MACKEY, Investigative Counsel
DAVID JUNG, Professional Staff
KIMBERLY ROBERTS, Staff Associate
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The Honorable Louis J. Freeh, Director of the Federal Bureau of Investigation
Mr. Arnaud de Borchgrave, Center for the Strategic and International Studies
Mr. Jack Blum, Esq., Attorney at Law, Firm of Lobel, Novins and Lamont
The Honorable Benjamin A. Gilman, Chairman, Committee on International Relations
The Honorable Louis J. Freeh
Dr. Giovanni De Gennaro
Mr. Arnaud de Borchgrave
Dr. Louise Shelley
Mr. Jack Blum
Letter from Barbara Larkin, Assistant Secretary of State for Legislative Affairs, Department of State
Letter from Alexander Lebed, Chairman of the Russian Popular Republican Party
Article submitted by Mr. Gilman from the Washington Times, October 27, 1997
Photos of Colombian National Police submitted by Mr. Gilman
Article submitted by Mr. Gilman from the Washington Post, September 29, 1997
Page 5 PREV PAGE TOP OF DOCMap of guerilla presence in Colombia submitted by Mr. Gilman
Article submitted by Mr. Gilman from the Dallas Morning News, October 9, 1997
Article submitted by Mr. Gilman from USA Today, September 17, 1997
Article submitted by Mr. Gilman from the Associated Press, October 2, 1997
Letter from Mr. Gilman to Hon. Thomas Pickering, Under Secretary for Political Affairs, Department of State
Article submitted by Mr. Gilman from Insight, November 24, 1997
Article submitted by Mr. Hyde, a Representative in Congress from Illinois
THE THREAT FROM INTERNATIONAL ORGANIZED CRIME AND GLOBAL TERRORISM
WEDNESDAY, OCTOBER 1, 1997
House of Representatives,
Committee on International Relations,
The Committee met, pursuant to notice, at 10 a.m. in room 2172, Rayburn House Office Building, Hon. Benjamin A. Gilman (chairman of the Committee) presiding.
Chairman GILMAN. The Committee will please come to order. Members will take their seats.
Our hearing today deals with an issue that is and should be of concern to our entire Nation, namely, the growing threat from global terrorism and organized crime. In fact, a new poll shows that Americans now find the prospect of nuclear terrorism among the most likely and frightening outcomes of the post-cold war era. More disturbing, three-quarters, 76 percent, of those interviewed believe that a terrorist group will use a weapon of mass destruction on American soil within the next decade.
Page 6 PREV PAGE TOP OF DOC Up until recently, most of us have viewed the problems of drug trafficking, organized crime and terrorism as issues of obvious concern, really only of marginal nature, though. In other words, drugs were only a danger to a small percentage of our citizenry; that organized crime was a menace, but restricted to car theft, gambling scams, and racketeering in larger cities. And finally, the terrorist groups were dangerous, but were usually operating in foreign countries and could only muster up an occasional suicide bomber.
Moreover, each of those problems were isolated and with little influence or action over the other. In other words, our only challenge was for the DEA to stop heroin or cocaine shipments while en route to the United States and for the CIA to infrequently share intelligence information with other countries concerning organized crime or terrorist activities in their own country, or for the FBI to identify and arrest amateur terrorists stumbling around with small, crudely homemade bombs searching blindly for unsuspecting targets.
We truly wish it were that simple. Regrettably, we are in something far worse. I will humbly suggest that what we are witnessing these days are three types of criminal activities: Drugs, terrorism, and organized crime, which are like three huge geological plates which are slowly starting to shift and grind together. They could ultimately produce an earthquake of unprecedented magnitude and destruction.
To be specific, all of these groups are far more sophisticated, far better financed and more disciplined than previously suspected.
Drug cartels have the ability to move literally hundreds of billions of dollars in and out of legitimate financial systems. In Colombia, for example, a few years ago several arrested members of the Medellin cartel reportedly offered to pay off the Colombian national debt if only their government would not honor its extradition treaty with the United States, which had been honored as early as 1985.
Today the Colombian Constitution has been amended and no longer permits extradition of Colombian nationals. Organized crime groups, particularly in Russia, now have almost a choke hold on the country's vast natural resources, as well as their banks and media.
Page 7 PREV PAGE TOP OF DOC Russia has been described recently by the press as a kleptocracy from top to bottom, a semicriminal State. And there are now various terrorist groups, including those being sponsored by Iran and Iraq, which are actively recruiting top nuclear scientists in their efforts to obtain nuclear weapons. And most recently, Russian General Lebed, a former national security advisor to President Yeltsin, suggested that dozens of nuclear suitcase devices are mysteriously disappearing from Russia's military arsenal and are feared out there and available on the black market. And the same threat exists from weapons using biological or chemical content.
What all of this tells us is that in the interest of global business, these dangerous groups will soon cross a threshold of compartmentalization, will begin merging and are working jointly with one another.
Its sophisticated and highly disciplined managers view crime as an investment; indeed, an export commodity. When opportune, they will pool resources and move back and forth between legitimate and illegitimate activities, just as they are beginning to do today. This new globalized crime wave will take complete advantage of the new technologies to hide their activities, and when combined with their ability to move huge sums of money instantly, actually threaten every free society's ability to assert financial control over its own economy.
These new global cartels can ultimately be capable of buying entire governments, commercial trade zones in emerging democracies and eventually undermining established Western markets and stable world financial commercial trading systems.
Last but not least, their ability to obtain and hide the purchase of stolen weapons, including nuclear devices, will give any major crime cartel or terrorist organization the necessary means to power bully itself through the use of force and intimidation, something we all know is part and parcel of their natural behavior.
We have as witnesses today members of both the law enforcement community, both domestic and international, and the private sector, all of whom are exceptionally knowledgeable on both the depth of the problem and its potential solutions.
Page 8 PREV PAGE TOP OF DOC Inasmuch as we are going to have to be finished by 12:30, I would like to ask the other Members to forego opening remarks so we may be able to have more time for questions and answers. However, I will turn to our Ranking Minority Member, Mr. Hamilton, for any opening statement he may wish to make.
Mr. HAMILTON. Mr. Chairman, I will yield to Mr. Payne, who wants to make a statement. I just want to express my appreciation to our witnesses for joining us this morning. We are very pleased to have them.
Chairman GILMAN. Thank you, Mr. Hamilton.
Mr. PAYNE. Thank you very much, Mr. Chairman, for calling this very important meeting here today on global terrorism. It is extremely important in today's world that we look carefully at what is going on in the world. I know that terrorism exists all over the world, but I have seen firsthand how the problem has affected the Sudan.
I was extremely disappointed to learn about the State Department's premature decision to restaff our embassy in Sudan earlier this past week. I know that the decision was inevitably recanted, and I am pleased to hear that.
This type of carelessness can only lead ultimately to a failed policy in Sudan and in the surrounding regions. My last visit to Southern Sudan to see the conditions several years ago, there has not been improvement in the manner in which that government deals with the south of Sudan, and for our government to decide to reopen its embassy where the government has resisted any changes is unconscionable.
We cannot reward the National Islamic Front Government without them showing any tangible evidence of reform. The NIF Government continues its war policy in Southern Sudan, condones slavery, targets innocent citizens and supports terrorism. We should state clearly to this government that enough is enough.
Page 9 PREV PAGE TOP OF DOC The government has yet to comply with the U.N. Security Council resolution demands to hand over the three terrorists accused in the attempted assassination of the President of Egypt, President Mubarak. Last year, our own Administration rewarded the Occidental Petroleum Company with a business deal in the Sudan. Knowing that the 1996 antiterrorism bill covered the Sudan and that the Sudan is listed as one of the seven countries that sponsor international terrorism, they blatantly overlooked this, and today James Rubin had to acknowledge that the Administration failed to take into account legislation we are considering to tighten existing sanctions against the al-Bashir Government.
It is important that we send a strong message to the government that their behavior is unacceptable. The message that we are presently sending is ambiguous and will ultimately disrupt what we have already accomplished through the IGAD peace initiative.
I had the opportunity to be in Kenya at the time that the IGAD group was meeting, the group Mr. Moi is leading, and on October 26th, there will be a meeting between the al-Bashir Government and al-Bashir himself and Mr. Garang, where they are attempting to come up with a settlement and a peace accord.
For us to have opened our embassy at this critical time, when African countries are taking the initiative to attempt to solve regional problems as we have encouraged them through ECOWAS and other regional organizations, for us to open our embassy at this time is totally insensible to what is going on on the ground.
No one can guarantee whether those hearings or those meetings will be successful, but for us to tip our hand toward the Government of Sudan would weaken Garang's position.
In conclusion, let me say that small mistakes can consequently become big mistakes, and I would hope that the Administration would pay more attention to their moves and have it in concert with what we are trying to do here in the House of Representatives.
Page 10 PREV PAGE TOP OF DOC Thank you Mr. Chairman.
Chairman GILMAN. Thank you, Mr. Payne.
We are pleased to have as our first witness the director of the FBI, the Honorable Louis Freeh.
For the record, I would like to note that the director of the CIA had initially agreed to appear, but subsequently was unable to appear.
Director Freeh has served as an FBI Special Agent from 1975 to 1981 in the New York City field office and at the FBI headquarters in Washington. In 1981, he joined the U.S. Attorney's Office for the Southern District of New York as an assistant U.S. attorney. He subsequently held positions as Chief of the Organized Crime Unit, Deputy U.S. Attorney and Associate U.S. Attorney.
In July 1991, President Bush appointed Director Freeh as a U.S. District Court judge for the Southern District of New York, where he served in that position until he was nominated as Director of the FBI by President Clinton in July 1993, and he has been serving with distinction continually since that time.
Chairman GILMAN. Director Freeh, we welcome you to our Committee. You may put in your statement in the record and summarize it, however you deem appropriate. Please proceed.
STATEMENT OF LOUIS J. FREEH, DIRECTOR, FEDERAL BUREAU OF INVESTIGATION
Mr. FREEH. Thank you, Chairman Gilman. Good morning, Mr. Hamilton, all the other distinguished members of the panel. It is a pleasure, as always, to appear before you, and let me commend you for the timeliness of this hearing.
Page 11 PREV PAGE TOP OF DOC Just in the last week, we have seen indications, repeated indications, from many different sources that the issues of global crime, particularly organized crime, as it is impacting on the United States and Americans, both now and the years to come, is becoming a huge problem with grave dangers.
Last week, Mr. Chairman, you spoke to the European Institute. In your presentation you noted that recent studies have shown that just with respect to international narcotics dealings, $400 billion in profits is a conservative estimate of that trade, representing approximately 8 percent of the world economy.
Last week, President Yeltsin, grappling with the increasing dangers of organized crime in his country, said, and I quote from him, ''With respect to organized crime, criminals have today brazenly entered the political arena and are dictating its laws, helped by corrupt officials. They can get everywhere unless the whole of society from top to bottom joins in an effort to end this scourge.''
Early in the week, we also saw the publication of an outstanding study by the Center for Strategic and International Studies, Judge Webster and one of your other witnesses who will appear here today, Arnaud de Borchgrave, which again noted the imminent dangers that organized crime pose, particularly focusing on Russian organized crime and Eastern European crime.
The size of this problem is really immense. We have, for instance, in the United States approximately 24 organized crime families, traditional La Cosa Nostra families, that we have identified, which are composed of about 2,000 active members. The Russian Ministry of the Interior has estimated that with respect to Russian organized crime groups, they number 5,000 to 8,000 groups; some 100,000 members. Thirty of those groups are active in other countries, including the United States.
So the appearance of this problem and the scope of this problem are one which require immediate attention, and I commend you, Mr. Chairman, for the leadership you have shown in this particular area, giving law enforcement, in particular, the tools and weapons it needs to fight global organized crime in the 21st century.
Page 12 PREV PAGE TOP OF DOC The FBI has jurisdiction in 79 matters, which now give us extraterritorial authority. Back in 1933, the Congress gave us for the first time not only arrest powers, but the powers to carry firearms. Now, 64 years later, we need additional tools and resources and the international cooperation among police departments to deal with global problems in a totally new venue.
We have indicated, and I have set it out in greater detail in my prepared statement, but to summarize, we have identified organized crime organizations not just from Russia and Eastern Europe but from Asia, from Africa, from many other parts of the world, which are beginning to operate very effectively and very dangerously in the United States. Part of the identification process has been the result of police cooperation, the alliances which are being formed between police departments in Russia and the United States, which supplement very long-standing police relationships with countries such as Italy, the United Kingdom and many other countries where we have established a presence for many, many years.
In addition to the global aspects of organized crime, we also face the global aspects of terrorism. We know that, whether it is in the World Trade Center or whether it is Americans in a dormitory in Saudia Arabia, the targeting of Americans and American interests around the world have increased dramatically, and the subject and problems of terrorism are now here and confronting us on almost a daily basis.
A substantial portion of FBI cases today have foreign connections. That is a rapid departure from the tradition where most of our investigative matters included evidence, witnesses and investigations here within the United States. To deal with this problem, it is essential that we form the alliances with the police departments around the world.
In June of this year, in fact within the space of 24 hours, June 17th and June 18th, into Dulles Airport came two individuals in the custody of the FBI. One was Kansi, who, as you know, is now on trial or to be on trial for the murder of two CIA employees in Langley, Virginia. The other individual came from Canada, an individual named al-Sayegh, who was wanted and is still wanted for questioning with respect to his participation or knowledge of the bombing in Khobar, in Saudia Arabia.
Page 13 PREV PAGE TOP OF DOC Both of those individuals returning to the United States within 48 hours came here because of the FBI's ability, through its Legat program overseas and its cooperation with foreign police authorities, to conduct investigations and project American resources to the places around the world where fugitives and criminals who would harm Americans operate and find safe harbor.
We are in the midst of a series of technological steps to increase our ability to police and investigate, in cooperation with foreign authorities. Last week I signed an agreement with the head of the German BKA, which is their equivalent of the FBI, which establishes in their headquarters at Weisbaden an NCIC terminal, the National Criminal Information Center, where they can look at, at the same time that we look at, information with respect to stolen cars and other files which are in our NCIC system and which 17,000 police departments in the United States have access to.
We are in the process of forming international data bases which will be used with respect to terrorism; forensic access so laboratories around the world can consult with each other immediately through telecommunications and imagery technology. Those are the things and the tools that are required for us to do our job in a global environment.
One of the templates of the cooperation that the FBI and other Federal agencies have developed around the world is the cooperation with the Italian authorities in particular, the Italian National Police. I am very proud to appear here with Giovanni De Gennaro, who is the deputy director of the Italian National Police.
Mr. De Gennaro and I met for the first time in 1982 in Quantico, when for the first time FBI officials and Italian police officers sat down together and decided that we had a common target, the Sicilian Mafia, which was present both in Italy and the United States. And we came up in that 3 days of meetings with the first plan to deal with this particular issue.
That cooperation has been extraordinary in its scope, its duration and its impact. Last Friday, an Italian court in Caltanissetta, Sicily, returned the conviction and sentences against the individuals responsible for the murder of Italian magistrate, Giovanni Falcone, who was murdered in 1992, along with his wife and three police officers in Sicily.
Page 14 PREV PAGE TOP OF DOC The fact of that conviction, the lead defendant was Salvatore Riina, a longtime fugitive and Mafia leader, in itself was impressive. But more impressive was the cooperation between FBI agents and Italian police officers which led up to that conviction; one small piece of that cooperation. The individuals who set off the bomb under the highway that killed Judge Falcone had set up on a hillside in Capaci. It was the vantage point to see the motorcade. At the crime scene, Italian officials and FBI agents found, among other things, cigarette butts. The cigarette butts were retained as evidence. Ultimately, they were examined by Italian police officers at the FBI laboratory, and identifiable DNA was taken from those cigarettes, which led directly to the identification of some of the killers.
During the course of the trial, FBI agents testified in Sicily; during other parts of the investigation, Italian police officers testified in the United States, as well as conducted court-authorized Title III surveillances as part of our investigations.
That is the kind of cop-to-cop cooperation that not only solves cases, but saves lives, whether they be Italian lives or American lives. And that is the type of cooperative arrangement which we are striving to establish with many new friends and new allies, including police officers in many of the former Soviet republics.
Let me just outline briefly the three key elements of our strategy and plans for international law enforcement cooperation. The first one is the necessity to have a permanent FBI presence overseas. We have now in 32 countries, stationed in our embassies, and working under the full authority and knowledge of our ambassadors, FBI agents who are liaison officers representing the interests of the Federal Bureau of Investigation and the United States with respect to law enforcement activities.
They do not have the authority to conduct investigations or interviews on their own. They work strictly as liaison officers with the foreign counterparts, but their presence gives us the ability to assist in the crime scene in Sicily, find fugitives such as Kansi, return people to the United States, and protect Americans by preventing not just criminal acts, but acts of terrorism.
Page 15 PREV PAGE TOP OF DOC That is the single most important aspect of our international police cooperation. These agents, who are in 32 countries, are able to directly talk to and relate to their counterparts. Our agents in Egypt and Riyadh, for instance, most of whom speak Arabic, native-born Arabic speakers, are able to pick up the phone or walk into the office of their counterpart and get the kind of police cooperation that would be greatly frustrated and protracted if we were to be dealing with them thousands and thousands of miles away through many different intermediaries.
The second aspect of our initiative for international police cooperation is the training of foreign law enforcement officers, both in basic and advanced techniques in the United States, as well as in various countries, and particularly in the context of the International Law Enforcement Academy in Budapest, which by everyone's estimation has been a remarkable success. We have trained there, over the course of the last 2 years, approximately 497 police officers from 20 countries.
The first course that those officers receive is a course in human dignity, to understand the ethics of policing in a democracy as opposed to the traditions in many of the countries, particularly the former Soviet republics, which are represented now in that Academy.
We also work very hard to train police officers at different levels, giving the needs and expertise required in particular jurisdictions. In 1997, in addition to the Academy in Budapest, we provided 120 training courses to over 4,000 police officers from 59 countries. Those range from courses in bank fraud and bank embezzlement to courses in doing crime scene and bomb detection schools. The effect of that training directly relates to our jurisdiction and the protection of Americans here.
One recent case was a case we worked with the Russians where an individual sitting in St. Petersburg using a laptop computer broke into a Citibank account in New York and moved about $10 million. The bank ultimately suffered a loss of approximately $400,000. The individual never left his apartment during the course of that crime. Our relationship with the Russian police officers enabled us to not only recover most of that money, but eventually resulted in the arrest and the extradition to the United States of the individual responsible for that crime.
Page 16 PREV PAGE TOP OF DOC That is one of dozens and dozens of cases where we can document that the presence of FBI agents overseas and the relationship that they establish with their host countries helps Americans and gives us the ability to solve our crimes.
Eighty percent of all of the work that our Legats do in foreign countries relate directly to domestic cases, to investigations, not only by the FBI, but the Kansi case, which, of course, is a Fairfax County homicide case, not an FBI case, but we can use our liaison to establish the necessary links and contacts.
All of these initiatives depend on the quality and dedication of the agents who serve in these posts. Almost all of our agents speak a level 2 native language with respect to the countries where they are assigned. These are trained investigators. We do not conduct any intelligence operations in these countries. All of our work is criminal enforcement, liaison contacts, again working under the full supervision of the Ambassador.
We have worked very closely with the State Department to establish the rules of the road and the protocols by which our agents operate. Early in this year, the Attorney General and the Secretary of State signed a memorandum of understanding which clearly spells out the authorities and the responsibilities of the FBI agents to report directly to the Chief of Mission, the U.S. Ambassador, so all of our activities overseas are within the knowledge of that officer, who, of course, represents the United States.
I can cite many, many different examples of cases where the liaison program, the Legat program and the training program have inured directly to the benefit of the people that we protect in the United States, both to prevent crimes and to solve crimes. And many of those are set forth in my opening statement, which I will submit for the record.
Let me just conclude by saying that the most important global and transnational cases that the FBI has been involved in in the last several years, whether the bombing of the World Trade Center in New York, whether we are dealing with Russian organized crime, have been successful only because of the presence of FBI agents overseas and their very unique ability to establish working relationships with their counterparts. The model that we strive for in many of the new countries where we are present is the relationship that we have developed with the Italian National Police, which you will hear about in a moment.
Page 17 PREV PAGE TOP OF DOC The ability of the FBI to investigate the 79 matters which the Congress has given us in terms of extraterritorial jurisdiction requires the presence of these agents around the world. We don't have all that many of them. If all of the agents are deployed by the end of 1999 in the plan that was approved by the Congress last year, we are only talking about 146 agents in over 40 countries and 116 support personnel.
That is a very small but prudent investment for the country and for the mission of the FBI to conduct not just the criminal enforcement responsibilities, but the counterterrorism responsibilities. We have become concerned, as have many, including the leadership and Members of this Committee, with global terrorism, with the proliferation of nuclear weapons. Within the last several years, we have seen purchases and sales of highly enriched uranium in Prague and Munich, not quite enough to make an atomic device, but anything over 2 kilograms, which we saw in one case, is certainly enough to put us on the most high alert and to ensure that we have right now the framework and the infrastructure and the contacts where we can react quickly to these cases, first of all to prevent what would be an incredibly devastating disaster, but also to be able to respond effectively and investigate these types of cases.
We are very thankful to the Congress and particularly to this Committee for the support of both the Legat program and the counterterrorism program, which you have shown over many, many years. And again, I commend you, Mr. Chairman, Mr. Hamilton, all the Members of the Committee, for having this particular hearing. I think it is the most relevant thing that we can be doing in terms of public safety, because we are facing problems, the scope of which we have never before seen in law enforcement. These are problems which transcend boundaries. The tools and the telecommunications ability of criminals and terrorists are quickly matching or even outmatching what we have in response. So it is an extremely important area, and we certainly commend the Committee and its leadership for your interest. Thank you, sir.
Chairman GILMAN. Thank you, Director Freeh, for your extensive testimony and for your kind words regarding our cooperative and supportive efforts. I think we all have to work together on this very critical problem.
Page 18 PREV PAGE TOP OF DOC [The prepared statement of Mr. Freeh appears in the appendix.]
Chairman GILMAN. We will reserve questions for Director Freeh until we conclude with Director De Gennaro. And I want to especially take this opportunity to thank your government, Mr. De Gennaro, and its authorities for the long history of cooperation that you have given our Nation in the fight against organized crime.
We are particularly grateful to the Italian National Police for being the first in Europe to step up to the plate and help us train the emerging police forces of Eastern Europe at the headquarters of ILEA that Director Freeh mentioned, the International Police Academy in Budapest. Your government's dedication and professionalism in this difficult fight against organized crime was evident with the recent conviction and life sentences of 24 Mafia figures who played a role in the murder of Prosecutor Giovanni Falcone.
Senior Italian National Police official Giovanni De Gennaro has a strong background in fighting Italian organized crime and drug trafficking. He has been in charge of that struggle for a number of years. Mr. De Gennaro came from a southern Italian city, Reggio Calabria, and speaks fluent English. I wish our Italian was as good as his English. He is presently Deputy Chief of the Italian National Police, the INP, and head of the Criminalpol, special branch within INP.
Mr. De Gennaro, please proceed. You may read your whole testimony or summarize, whichever you see fit, and we will include your entire statement in the record.
STATEMENT OF GIOVANNI DE GENNARO, DEPUTY DIRECTOR, ITALIAN NATIONAL POLICE
Mr. DE GENNARO. Thank you, Mr. Chairman. Thank you honorable Members of Congress to invite me here. It is a great honor for me as a representative of the Italian law enforcement to appear today before such an important forum. I will try to make a summary of my statement.
Page 19 PREV PAGE TOP OF DOC I apologize for my bad English, but I will try to read something because it is easier than to ask the help of the translator.
Chairman GILMAN. Mr. De Gennaro, would you kindly move the microphone a little closer so that we won't have any trouble hearing you. Thank you.
Mr. DE GENNARO. Today's opportunity evokes in me feelings of pride and affection because of the 20 years that I have done to cooperate with my colleagues of the U.S. Federal agencies. I hope that during those 20 years, I contributed personally to improve the relationship between our agencies, our law enforcement, and even to improve the culture of the cooperation, because as Director Freeh said, it is the strongest weapon that we have in our hands.
Inspired by these feelings, in the short time I have been assigned, I will present another view of the threat currently posed in Italy by domestic and foreign organized crime groups. And I try to provide to you some information about our legislations that we use to fight against organized crime.
Surely my presentation will be an exhaustive one, so I am ready to answer all the questions that you honorable Members of the Committee want to pose to me.
However, I would like to stress that the successful results we have obtained against organized crime in Italy are due not only to new and more effective laws and improved organization, but I want to confirm that it came only by the awareness that unilateral efforts are not sufficient. This is not new for Italy and the United States, because for many years our two countries, as Director Freeh said, have implemented a model of investigative and judicial cooperation whose successful results in the struggle against the various types of criminal activities make it an example for all nations, I am sure. This also enabled us to ensure greater protection for both U.S. and Italian citizens in their own countries and abroad.
Bearing these considerations in mind, I will present an overview of organized crime in Italy, but I will speak in particular of the Sicilian Cosa Nostra, not only because it is the most dangerous and serious criminal organization in Italy, but also because it has traditionally been connected to LCN in the United States, as the investigation that we conducted in past time demonstrated.
Page 20 PREV PAGE TOP OF DOC Just as any criminal organization, the Sicilian Cosa Nostra bases its power on the control it has over the territory from which it emerged, terrorizing the citizens living and working in the area. The most effective means of creating the situation of terror are still extortion, as they always have been. The reason is that while extortions are a source of illicit proceeds, they also enable the Mafioso to exert their power of intimidation. That is their most important power.
There are also other profitable activities, such as drug trafficking, cigarette smuggling, illegal influence over bids to tender for public contracts; thanks also to mafia-controlled enterprises.
But there is something more that makes the Sicilian Mafia so dangerous. Clashes between criminal groups belonging to the same organization to obtain control over specific areas and criminal activities has caused nearly 1,500 murders in Sicily alone over the last 15 years, about 100 a year. The government never let up its struggle against organized crime, and this prompted the Mafia's violent reaction, which increasingly involved public representatives as well.
Over a period of 20 years, from 1971, when the murder of Mr. Scaglione, chief prosecutor in Palermo, took place, to 1991, when Antonino Scopelliti, public prosecutor in the Maxi-Trial against the Mafia, was killed, over 40 people engaged in the fight against the Mafia were murdered, including law enforcement officers, magistrates and politicians.
Let me recall in particular my colleague, Boris Giuliano. He was the chief detective in Palermo. He was killed in July 1979, and he was the first Italian officer who attended the FBI Academy, and he was an example for everybody else.
In the early 1980's, however, there was the first decisive turning point in the struggle against organized crime, thanks to Judge Giovanni Falcone and his ideas. He firmly believed that it was essential to hit not just single criminals, but the whole criminal system by targeting the entire organization, rather than single crimes.
Page 21 PREV PAGE TOP OF DOC The second decisive turning point, Mr. Freeh recalled, speaking about our meeting in 1982 in Quantico, because it came about thanks to the cooperation between Italian and U.S. investigators; the third one, because for the first time in the history of the fight against the Mafia, a high-ranking member of the Sicilian Cosa Nostra, Tommaso Buscetta, testified before Italian and U.S. judicial authorities, and he broke the Mafia strict code of silence for the first time.
As a result, the first phase of the so-called Palermo Maxi-Trial against the Sicilian Mafia involved 500 defendants; arrived to the end in 1993, with 19 life imprisonment sentences and a total of 2,665 years of imprisonment for all the defendants.
Confronted with this concrete and strict law enforcement action, for the first time the Sicilian Mafia changed its strategy, and began to use terrorist techniques, and we spoke at that time of Mafia terrorism. They placed a bomb on a train in Naples-Milan which caused the death of 15 passengers and the wounding of another 230. It was the first terrorist attack of the Mafia against the government.
But the experience that Italian investigators had already acquired over the years, however, enabled them to promptly respond, thus immediately identifying the responsibility of the Mafia and those guilty of the crime, who were sentenced to life imprisonment.
Let me give you some numbers, because since those years, our constant efforts have become increasingly successful. Between 1983 and 1996, more than 52,000 people were reported to the judicial authorities all over Italy on Mafia-related charges, and assets for an approximated total of 7,000 billion lire were seized; 1,277 dangerous fugitives were apprehended, including the most important fugitive, Salvatore Riina, a fugitive since 20 years, the big boss of the organization.
In the early 1990's, with the final conclusion of the first Mafia Maxi-Trial, there was a new wave of Mafia terrorist attacks against the Italian Government with the obvious aim of weakening the anti-Mafia commitment.
Page 22 PREV PAGE TOP OF DOC Let me recall the attacks of 1992, when the Mafia killed the magistrates who had become the symbols of the struggle against the Cosa Nostra, Giovanni Falcone, Paolo Borsellino, their bodyguards, as well as the bombs which in 1993 damaged important artistic and religious buildings in Florence, Milan, Rome, causing the death of 10 people and the wounding of another 32. As Director Freeh recalled before, last week, we had the first sentence for those attacks, and let me thank my colleagues from the FBI for the help and the assistance that they gave us in that occasion.
To this new quality jump in Mafia attacks, however, we have countered an even more effective response, especially by updating necessary legislative and organizational instruments. In this context, the Italian Parliament enacted new laws, and even in this occasion we received strong support from the experience that we gained in the United States, because we have new law, which made it possible to, first, clearly define the role of cooperating witnesses; second, apply very strict imprisonment measures for the most dangerous of Mafia bosses; third, use undercover operations as an investigative technique to obtain evidence against major international traffickers. We didn't have this law before; and finally, entrust the Ministry of the Interior with the power of dismissing mayors and municipal officers suspected of being involved in the Mafia. That was real important in the south of Italy.
Despite those positive achievements, in Italy we are aware that these results will not last long if we do not step up our efforts. For this reason, we are now focusing on Mafia assets in order to undermine its criminal power.
Now I try to provide you some information about a new threat that we are fighting together with FBI agents. Now we are confronted with the Russian Mafia operating in Italy, in the United States and several other countries. Extensive intelligence and investigation activities conducted over the last few years by Italian and U.S. law enforcement agencies have revealed that in 1993, Russian Mafia bosses allegedly decided to expand their activities as far as Europe and in Italy in particular; members of Russian criminal organizations called brigades have been identified in Rome and in some parts of Italy; real estate investments and huge financial transactions have been ascertained in several Italian regions; the intense tourist flow from Russia is partially run and exploited by Moscow organized crime groups to facilitate drugs and arms trafficking as well as illegal immigration; businesses dealing in furniture, wrought gold, fuels, structural steel for construction are used to launder or reinvest illegal proceeds; large sums in U.S. dollars from Russia and Switzerland have been deposited in Italian banks by Russian enterprises and nationals for short periods of time in order to carry out suspicious financial transactions amounting to several billion dollars.
Page 23 PREV PAGE TOP OF DOC A significant example of the danger posed by the Russian Mafia, who can alter standard market mechanisms, is represented by brokerage houses established to purchase huge quantities of oil in favor of companies controlled by this organization. But investigations conducted in Italy have revealed several murders committed by affiliates of these organizations. We arrested killers. We seized weapons, very dangerous weapons.
To conclude my presentation, honorable Members of Congress, I would like to emphasize that the efforts made by Italian and U.S. law enforcement officers, prosecutors and magistrates against closely connected criminal organizations operating in our countries proved successful thanks to the fruitful cooperation established by Italian and U.S. investigators, the cop-to-cop cooperation that Mr. Freeh said before.
Personally, I was a witness in your court here in New York. This enabled us to share our experience and knowledge on the various criminal organizations, taking also into account prevention and security issues.
The present situation is even more challenging as, despite our combined efforts, we are faced with new, still unknown dangers whose seriousness we are well aware of.
During his recent visit to Washington, DC, the Italian Minister of the Interior stressed the need for an ever greater cooperation between the Italian Government and the United States, especially in the fight against Russian organized crime. It is in this light that we should consider the efforts of the Italian-American working group, as well as the common strategy against the Russian Mafia, on which the FBI and the Italian police agreed upon last July in New York. Cooperation will not be limited to intelligence, but will also have to produce concrete operational results in the very near future. And once again, we will be assisted by the FBI organizational structure, as Mr. Freeh said before, and as it has always done in the past, the Legal Attache's Office in Rome will play a fundamental role being entrusted with prompt communications and liaison between Italian and U.S. investigators operating in their respective countries.
Page 24 PREV PAGE TOP OF DOC Thank you, Mr. Chairman.
Chairman GILMAN. Thank you very much, Mr. De Gennaro.
[The prepared statement of Mr. De Gennaro appears in the appendix.]
Chairman GILMAN. We want to congratulate you for your extensive good work in trying to do whatever we can together in stamping out the menace of crime, terrorism and drugs throughout the world.
Before proceeding, I would like to incorporate in the record a letter from the State Department dated September 30th, 1997, directed to me as chairman of the Committee, signed by Barbara Larkin, Assistant Secretary of Legislative Affairs, in which they state, the Administration shares your concern about the threat which crime and corruption in Russia pose to the reform movement and the development of a democratic and market-oriented society in that country. In response to this threat, Ambassador Collins formed in 1994, along with then Assistant Secretary Gelbard, an interagency task force composed of the diplomatic, law enforcement, and intelligence communities to develop a strategy for combating organized crime emanating from Russia and to initiate an anticrime cooperative effort with the Russians. Ambassador Collins will continue to give this issue high priority when he arrives in Russia as our new ambassador.
I ask that the full letter be made a part of the record without objection.
[The letter referred to appears in the appendix.]
Chairman GILMAN. I have several questions, and I will try to be brief. I know our other colleagues have questions as well.
To Director Freeh, our Nation, and Italy as well, long ago underestimated the nature and level of the threat from Italian organized crime. Are we in the West in danger of making this same mistake again with regard to the spreading and often violent Russian-speaking organized criminal element?
Mr. FREEH. I think the danger is a real one, Mr. Chairman. I think, however, we are much better prepared and are working toward the problem. Traditional La Cosa Nostra organized crime first appeared in the United States at the turn of the century, actually in New Orleans. It took the FBI until 1957, when New York State troopers stumbled over the Appalachian meeting, before it really recognized and began to deal with organized crime. This is 50 years-plus after many, many years of power and entrenchment.
Page 25 PREV PAGE TOP OF DOC We are seeing the beginnings of powerful Russian organized crime groups in the United States. Mr. Ivankov is a great case in point. He was convicted recently in a Federal court in New York for racketeering activities. Ivankov is important because he is not a U.S. person. He is a Russian national. More importantly, he is the head of one of the most powerful Russian organized crime families in Moscow.
He came to the United States. We learned about his presence because of the Russian police and the relationship we have with the Minister of the Interior. The case was investigated here with the assistance of the Russian police. He was arrested. It would be the equivalent of arresting Carlos Gambino in 1930 instead of never arresting him, which was the case.
So I think we have a good head start. We know what the problem is. We know where our resources have to be put, but we are a long way from getting our hands around the problem.
Chairman GILMAN. Of course, we don't have the luxury of time as we had in past situations to combat other forms of organized crime.
Is there any evidence that former KGB officials are involved in the Russian organized crime syndicates?
Mr. FREEH. Yes, sir, there is; both in investigations in Russia, as well as in other parts of Europe, in companies such as Nordex, which is a Vienna-based company, a multinational company. There are strong indications of former KGB officers working directly with some of these organized crime groups, and that poses an additional level of threat and sophistication to these people.
Chairman GILMAN. Director Freeh, while in Thailand last month, we learned that the Thai authorities (ONCB) have a facility and the political will and expertise to help us operate an ILEA in Southeast Asia, one that could be as good as the one you have organized and are operating in Budapest. Why haven't we taken up that invitation by the Thais to move forward on such a vitally important facility?
Page 26 PREV PAGE TOP OF DOC Mr. FREEH. We are, as you know, Mr. Chairman, working very earnestly not just with the State Department, but other Federal agencies, particularly the DEA. We have sent some teams, both FBI, DEA and Department of State teams, to Thailand. This is an opportunity which we should exploit very, very quickly; in addition to a facility which would serve Latin and South America. This is the single best vehicle for liaison and training and giving us the ability to make the cases that I spoke about.
Chairman GILMAN. If we can be of any help to your agency in that direction, please don't hesitate to let us know. I think these are important training areas, and the one you launched in Budapest overcoming many obstacles, is certainly is a model of what can be done elsewhere.
One more question. Weapons of mass destruction like the suitcase-sized variety of the nuclear weapons former Russian General Lebed raised so much anxiety about most recently may someday fall into the hands of international terrorists. What do we know about the seriousness of that possibility that General Lebed raised and the role, if any, of international criminal elements dealing and trafficking in such weapons?
Mr. FREEH. That possibility is taken and has been taken with the utmost seriousness, not just by the FBI, but the Central Intelligence Agency, which, of course, runs the proliferation center for the United States.
We have not seen any hard evidence of suitcase-sized nuclear devices either unaccounted for or falling into the hands of criminals or terrorists. However, the possibility and the threat of that is extremely high and something which occupies much attention not just from the criminal law enforcement point of view, but from the national security point of view. If you can buy, as we saw 2 years ago, 2.7 kilograms of weapons grade uranium or plutonium in Munich or Prague, the same channels of access for those materials could quickly or easily lead to a fully operational device.
Page 27 PREV PAGE TOP OF DOC So we have not seen any hard evidence of that, but we are taking it with the utmost seriousness.
Chairman GILMAN. Thank you.
Referring to General Lebed's statements, we received today a letter from General Lebed. We had invited him to take part in a hearing. I will just read briefly one or two sentences from his letter and ask that it be made a part of the record.
''The problems discussed at these hearings are extremely important.'' And then he goes on to say, ''Let us assume that Russian officials' statements saying all nuclear devices are safe and fully controlled to be true. Will they be equally assuring if one says that Russian scientists who deal with technologies of production of nuclear ammunition, including compact devices, may be employed by radical regimes or may be involved in projects financed by international crime syndicates? Nowadays this threat is absolutely real.''
And then he goes on to state, ''Particularly concerning is the fact that Russian criminals more and more frequently use arms supplies as payment for drugs. It became known to the public that Russian and foreign criminals negotiated deals not only on small arms, mines and explosives, but 'earth-air' missile installations, combat helicopters and submarines as well. One can suspect that the criminals are in a position to actually finance such deals. This also indicates the amount of funds the international drug dealers might spend on purchase of the latest weaponry. Criminal groups operate the financial resources that can be compared to national budgets of some countries. One can naturally ask, what are the guarantees that weapons of mass destruction financed by narco-Mafia are not currently being developed somewhere in Latin America or Southeastern Asia? If we approach the issues of international security in a really responsible manner, we cannot just dismiss such questions.''
I am going to ask that General Lebed's letter be made a part of the record without objection.
Page 28 PREV PAGE TOP OF DOC [The letter referred to appears in the appendix.]
Chairman GILMAN. One question to our National Police witness, Mr. De Gennaro. Recently, in northern Italy, 13 Mafia figures were arrested and charged under your tough Mafia association law. How serious is the growth of Russian-speaking organized crime in Italy today? Please tell us a little bit more about the arrest in Italy of Yuri Yasin and his associates.
Mr. DE GENNARO. Yes, Mr. Chairman. As I tried to explain before, we discovered the influence of the Russian Mafia in Italy a few years ago. In the beginning, we had an intelligence moving from 1980 that close to Rome there was a group of Russian Mafia figures, and we didn't have enough information at that time to discover what they were doing.
But the new phase of the investigation we had, when we arrested a couple of years ago Monya Elson, he was a fugitive from the American justice, he was in Italy. It was the starting point for our investigation to develop more intelligence conductingon the operational level, not only from informants or somebody like this.
So at that point, we are quite sure that there are a lot of Mafia Russia figures operating in Italy, and we had to confirm this, when we arrested Yuri, as you recalled before, that his thieves-in-law are Mafia-connectedthieves-in-law is the name that we give to a boss figure in the Russian Mafia.
Well, at that point, as I told before, we were able to control the group operating for him, with strong connection to the United States, especially New York, with strong connection with figures operating even here in the United States in the same group; a strong group very well connected with the biggest group of Russian Mafia operating in Russia.
This is for us the first phase. From this intelligence, the information that we collected during the search and so on, we are able now to go in front of a second phase with the cooperation of our colleagues in the FBI, and in this sense we made the agreement last July to operate together.
Page 29 PREV PAGE TOP OF DOC Chairman GILMAN. Thank you very much.
Mr. HAMILTON. Mr. Chairman, thank you very much.
Director Freeh, I want to get some idea of the priority you attach to this business of international crime. International crime has been around for a long time; you mentioned, I think, yourself, decades. Where does this fit in your priorities?
The director of the FBI has enormous responsibilities for all kinds of criminal activity. Where does international crime fit in your priorities today? How much time do you spend on it? How much time does the FBI spend on it? What percentage of your resources are given over to it?
Mr. FREEH. We have approximately 82 special agents who are assigned to our foreign embassies as part of our Legat program. We have another
Mr. HAMILTON. How many agents do you have overall?
Mr. FREEH. 11,100.
Mr. HAMILTON. So you have a very small percentage of agents dealing with the problem?
Mr. FREEH. A very small percentage. They handled in 1995 approximately 11,200 matters, investigative matters. Eighty percent of those related directly to cases being investigated in the United States. So they are the foreign arm of the agents conducting our operations and investigations in the United States.
We attach a great priority to it. I would say, it is hard to estimate it, but I would probably spend maybe 5 percent of my investigative oversight time on cases relating to foreign operations and matters which impact on our jurisdiction; whether it is the Khobar bombing, finding Mr. Kansi, bringing Yosef back from Pakistan, who is now on trial in front of the New York court; a great deal of our resources, because those investigations overseas relate directly to major investigations here.
Page 30 PREV PAGE TOP OF DOC Mr. HAMILTON. Has the whole problem of international crime risen in magnitude and threat?
Mr. FREEH. Yes.
Mr. HAMILTON. And all the rest of it in, what, the last few years; is that fair enough to say?
Mr. FREEH. Yes, exactly so.
Mr. HAMILTON. Now, how does organized crime manifest itself in the lives of an ordinary American? I can understand if you have drug trafficking, you have drug problems, that is about as direct a manifestation as you can figure out; or if you have terrorism and a bomb goes off, that is pretty direct. Let's put those aside for a moment.
How does organized crime manifest itself in the life of the ordinary American, apart from drugs and apart from bombs going off, terrorism?
Mr. FREEH. Yes, sir. I will give you a couple of examples. We have done several major health fraud investigations, both in Los Angeles and Miami.
Mr. HAMILTON. Health fraud?
Mr. FREEH. Health fraud, individuals who are scamming Medicare systems or HMO systems; millions of dollars worth of fraud and losses being conducted by Russian organized crime groups; a recent case in Los Angeles, one in Florida, another one in New York. Kidnappings, we have seen a series of kidnappings around the United States of both U.S. persons, as well as people who are here legally from the People's Republic of China, from Russia. Those are kidnappings which affect families, and the FBI responds to those, obviously, as we would any other kidnapping.
Mr. HAMILTON. So a lot of their activity is fraudulent, extortionI think Director De Gennaro talked about extortion, you have major elements of organized crime operating in this country today carrying out those kinds of activities that you have just identified?
Page 31 PREV PAGE TOP OF DOC Mr. FREEH. Yes, sir.
Mr. HAMILTON. Is that right?
Mr. FREEH. What makes the Russian groups very unique and particularly more troublesome is traditionally La Cosa Nostra dealt with protection rackets, bootlegging, narcotics. These groups hit the ground with gasoline excise tax frauds, health frauds, as well as narcotics and extortion and the traditional racketeering crimes. So they are very diverse.
Mr. HAMILTON. Now, all of that kind of activity suggests a highly sophisticated operation. I mean, these fellows must be smart, and they must have computerization skills and all the rest of it. Is that correct? A highly sophisticated operation?
Mr. FREEH. It is a much more sophisticated type of organized crime than we have ever seen in the United States. It goes to cybercrime. It goes to complex fraud schemes. It goes to money laundering schemes and operations which involve hundreds of millions of dollars.
Mr. HAMILTON. I see. Let me ask you with regard to the NIS, to Russia itself, is the criminal activity in Russia so bad that it threatens the political and economic systems of Russia today? I mean, do they represent a genuine threat to the reformers in Russia?
Mr. FREEH. Yes. President Yeltsin has said that repeatedly, as late as last week. It has been the documented finding of many of the reform-minded politicians and leaders there for several years now.
Mr. HAMILTON. And this would be among the most serious threats to the Government of Russia today, organized crime?
Mr. FREEH. They describe it as the most serious threat to democracy, where the majority of their banks are controlled by organized crime, where many other aspects of the financial structures have been corrupted.
Page 32 PREV PAGE TOP OF DOC Mr. HAMILTON. I don't want to put you on the spot, but how would you assess the Russian Government capability, to deal with this most serious threat in Russia?
Mr. FREEH. I think they are having great difficulty in dealing with it on a number of levels. First of all, the training and professional level of the police, particularly in many of the areas outlying the capital, is not sufficient to deal with those problems. The judicial system and the very laws that are necessary to fight corruption and organized crime, which Mr. De Gennaro just documented serve his country, are not present in Russia.
The training, the pay, the danger to police officers there is so grave that they are having an extremely difficult time.
Mr. HAMILTON. I have many questions, but I am trying to understand the linkages here. You mentioned in your opening statement, I think you had 24 organized crime families in the United States, 2,000 people; if I understood you correctly, 500 or 800 families in Russia, did you say that?
Mr. FREEH. Actually, they estimate 5,000 to 8,000 groups, criminal groups.
Mr. HAMILTON. Groups. And 100,000 members. Now, are there linkages among these various groups and families? Is there some boss over everybodywhat kind of organizational structure do they have?
Mr. FREEH. There are many linkages between the groups. They are based on territorial demarcations. They are based on ethnic, as well as some religious, as well as geographical determinations.
Mr. HAMILTON. Do they cooperate with one another? Do they share information?
Page 33 PREV PAGE TOP OF DOC Mr. FREEH. Not as integrated as the traditional Mafia groups in Sicily or the La Cosa Nostra groups in the United States. They do work very closely with each other on particular joint ventures, criminal operations, but there is no hierarchy as there would be in the traditional organizations.
Mr. HAMILTON. Director De Gennaro, do you worry a lot more about the traditional Mafia in Italy, or has the Russian Mafia come heavily now into Italy and become more prominent than the traditional Mafia?
Mr. DE GENNARO. Sir, the big concern for me is the possibility that the two organizations can join between them. This is the biggest risk that we can run. And we have some example that it could happen, because there are Italian-organized Mafia figures investing money, operating in the St. Petersburg banks, and we have some details about that.
We have so many people carrying money from Russia, very rich people, investing money. I want to provide to you an example. In a small airport in the north of Italy, in a tourist place, well, in that airport 3 years ago, we had less than 400 Russian people arriving. Well, this year we discovered that they have their own company, plane company, and 100,000 people arrived.
Well, a lot of them are good people, coming there, collecting business. But try to think among 100,000 people how many criminals they can hide, and we don't have intelligence, as Director Freeh said before, because we don't have a direct line to it. We can hope only to have the similar cooperation.
Chairman GILMAN. The gentleman's time has expired.
Chairman HYDE. Thank you, Mr. Chairman. First of all, thank you very much for having these hearings.
I deplore a sense of complacency about this problem. Hopefully, it is dispelled by Director Freeh and Director De Gennaro and the second panel that will follow. I think this is a matter of the highest urgency.
Page 34 PREV PAGE TOP OF DOC Mr. Hamilton asked a question as to how capable we are of dealing with it. Mr. de Borchgrave, in his testimony, will point out that law enforcement's capabilities are now from 5 to 10 years behind the transnational crime curve.
There is a feelingthere has been a great let-down in our country, the cold war is over; there are no more wars to be fought. A war every bit as intense and every bit as catastrophic for freedom and for the free world is going on, but its character is entirely different now. It isn't SS18s that we need to be concerned about. It is organized crime on a worldwide basis, and we, of course, are our own worst enemy because we are the big customer for the cocaine and the rest.
I think these gentlemen have to tell us what they need, and we have to give it to them. And we have to alert the American people to the nature of this problem. It is not going to get better. It is going to get worse, unless we really cope with it. And they need assets, they need personnel who can penetrate, something always very difficult and takes years to accomplish. We need to get the people willing to risk their lives to penetrate these organizations and make it worth their while. But we have got to cope with this.
And let me also point out the link between the Colombian drug cartels and the Russian Mafia. It is palpable. The Mafia provides weapons and ammunitions for the emerging smaller drug cartels who stepped up to replace the enormous Medellin and Cali cartels that were destroyed by General Serrano's courageous Colombian National Police, some of whom are here today.
But this international enemy, the Russian Mafia, is as deadly a threat as there could be, and it comes from within as well as without their country. And I would like to put in the record a list of arrests that have been made recently by the Colombian police and military of drug traffickers with Russian affiliation. So if that may be put in the record, and I will yield back the balance of my time.
[The information referred to appears in the appendix.]
Page 35 PREV PAGE TOP OF DOC Chairman GILMAN. Without objection. And I would like to add to what Mr. Hyde said. Russian organized crime has amassed large quantities of weaponry. The Colombian narco-guerrillas, such as the FARC and ELN, have used drug proceeds to purchase such weapons as heavy machine guns, mortars, surface-to-air missiles and high-tech communication equipment, often from eastern Europe. Russian organized crime elements have become virtual arms bazaars for the Colombian narco-guerrillas to purchase weapons. The drug trade, beginning in Colombia, moves to Eastern Europe and Russia and then returns to Colombia in the form of weapons of death that feed the violence in Colombia, and this cycle continues.
I am pleased we have three representatives of the Colombian National Police visiting here with us today, who have been doing such an outstanding job.
The Committee will stand in recess while a vote is going on. I am going to ask our panelists if they would be kind enough to stay with us for just a little bit longer. Some of the Members who are going over to vote want to come back to inquire. The Committee stands in recess.
Mr. FOX. [Presiding.] The Committee will reconvene. Again, we thank all the witnesses this morning for their participation. We appreciate their expertise.
Dr. Freeh, good morning.
Mr. FREEH. Good morning.
Mr. FOX. Following up on what Mr. Hyde said on your needs to fight international crime, terrorism, what do you need as an agency director and for your agency in terms of specifics to wage a fight that you can win?
Mr. FREEH. Yes, sir. As I mentioned in my statement, I think we need it on three levels. We need the permanent and minimal FBI presence overseas to develop the kinds of relationships that Dr. De Gennaro and I have had now for 18 years.
Page 36 PREV PAGE TOP OF DOC We have asked for, and the Congress approved last year, in August 1996, a plan to expand the FBI Legat program from approximately 23 to 43 Legats. That would call for, by the end of 1999, 146 special agents in 42 different countries, with 116 support employees. That is a total of 262 people.
As I mentioned, the plan was submitted last year. It wasn't just an FBI plan. It was jointly submitted by the State Department and the Attorney General, and we have asked for funding in the 1998 and 1999 budgets to reach that level. We have also asked for a continuation of the training. As I mentioned, we have been able to train thousands of police officers around the world.
The benefit of that training is twofold. First of all, we can give them what they need most of all, which are the basic tools to conduct their own investigations. Just as importantly, we develop through those relationships, as Dr. De Gennaro described, the cop-to-cop contacts and relationships. So an FBI agent or a DEA agent can pick up the phone and speak to a police commander in Uzbekistan or Kazakhstan, if that is the place we need to do our work. So the training is a very important part of the whole program.
And again, finally, that we need the technological tools to do our work. We have to be able to communicate rapidly and securely. We have to deal with encryption. We have to deal with cybercrime, and those are all part of a larger technological challenge which we are trying to meet.
Mr. FOX. Thank you, Director Freeh.
I would ask this question to both you and Director De Gennaro, and that would be: A Colombian Army major recently said this about the links between terrorists and drugs: The influx of ill-gotten drug money means that the boundaries between FARC, drug traffickers and organized crime have merged in a pool of terror and bloodshed that has dramatically increased violence in Colombia, including holding six Americans hostage.
Page 37 PREV PAGE TOP OF DOC Are we seeing more and more links between drugs and terrorists since the cold war? And I would ask this to both directors.
Mr. FREEH. Yes, sir, I think we are; not only with respect to the FARC kidnappings. As you note, there are six Americans currently held hostage, many more taken, released, some of them killed. There are alliances between some of the Colombian cartels and both American Cosa Nostra groups and Russian organized crime groups, particularly with respect to sending cocaine from South America to Russia, where the Russian groups, in conjunction with the cartels, seized in Europeand Russia has a vast market for cocaine, which it is actually much more profitable to sell over there. So those links and particularly some documented in recent DEA cases between Russian organized crime and South American groups are growing, and I think very dangerous.
I will let Dr. De Gennaro comment on it from his point of view.
Mr. DE GENNARO. In Italy, we didn't have any kind of example of violence coming from Colombian organized crime. We didn't seize weapons as we did from Russian people, but only a lot of money. And we conducted many investigations, joint investigations, with the Federal agencies here.
Mr. FOX. Go ahead. Please continue.
Mr. DE GENNARO. I can mention to you the Big John operation, 1990, we arrested 30 people, and we discovered the links between the Sicilian Mafia and the Colombian Mafia; the Green Ice Operation, 1992, we arrested 150 people in Italy and the United States; the Dinero Operation, 85 arrests in 1994; the Unigold Operation in 1995 with 12 arrests. All of those operations were against Colombian profits from drugs.
Mr. FOX. I very much appreciate your testimony. I now want to turn the questions over to Congressman Lindsey Graham.
Page 38 PREV PAGE TOP OF DOC Mr. GRAHAM. Thank you, John.
Director Freeh, I appreciate your testimony. It has been quite riveting actually.
One of the briefing papers we have indicates that the American public in a recent poll, for whatever you want to take polls worthsay that 70 percent of the American people who were surveyed found it likely that the United States could be attacked by terrorist groups within the next decade, using smuggled nuclear devices.
If you were asked that, what category would you be in?
Mr. FREEH. I think it is a threat and a possibility that should occupy our highest priority. I think we have seen attacks certainly in Oklahoma, in New York City. We know that many of the State sponsors of terror, including Iran, are rapidly and very aggressively acquiring nuclear technology, both in terms of warheads and launching devices.
We know that many of the State sponsors of terrorism, particularly Iran, sponsor and fund and control Hizballah groups, including groups which have connections and operations in the United States.
So the links, although I don't think I have seen them in a documented form, clearly suggest that if a terrorist is willing to use a truck bomb to blow up a building with thousands of people at risk, the accomplishment of the particular objective would not be changed or influenced by the opportunity to use much more devastating equipment or a biological or chemical agent. So I think we have to take the possibility extremely seriously, and we have to take drastic steps to try to detect and prevent that.
Mr. GRAHAM. Well, it seems like two sources of acquiring these weapons are from your testimony, the organized crime connection to the Russian military and the questionable infrastructure surrounding control of nuclear weapons. If we only have 100 and something agents abroad, what would you like to see Congress do?
Page 39 PREV PAGE TOP OF DOC Do we need more agents abroad to work the link between the Italian Mafia and the Russian Mafia? Would it help decrease the likelihood that some group would be able to smuggle a nuclear device in here if we were more proactive?
Mr. FREEH. It certainly would. The 146 special agents that we have asked for by the end of 1999 is really the minimal that we need.
Mr. GRAHAM. Put a number on it. I mean, in a perfect world, I think this is one of the big issues that Congress needs to talk about, and I have been to Russia. I have sat down and spoken with General Lebed, and I think he is sort of a kook, to be honest with you. He talked for 45 minutes about a political agenda, and he mentioned these briefcases at our meeting, and I don't know if he is accurate or not. It is certainly worth finding out. But he has a most definite political agenda. So I am going to take what he tells us cautiously, but I think we would be fools to ignore it. And if anything he says is accurate, the fissile material and the actual nuclear weapons themselves are in a very precarious situation. And the country seems not to have a policy about how to help the Russians dismantle their nuclear deterrent force and how to control the possibility of the criminal element getting into the military infrastructure to the point that they can seize these weapons.
I am willing to help you, and I think everybody in Congress would be. Tell us in round numbers, what would help?
Mr. FREEH. I think if you confine the discussion just to the proliferation threat in Eastern and Central Europe, coverage in countries not just like Russia, but in Kazakhstan, in Uzbekistan, in Chechnya, in all the other countries where not only the presence of Russian organized crime but the accessibility to fissile materials is ready and available, I would say you could probably conservatively assign 25 to 30 agents on a full-time basis in those countries and in the European countries where we have seen proliferation. We have seen sales of highly enriched plutonium in Munich, in Prague. We think this material is coming out of the former Soviet Union and its republics.
Page 40 PREV PAGE TOP OF DOC We would like to have the opportunity to work undercover operations with the Russian police to introduce FBI agents, for instance, as purchasers for this material to identify people who are traffickers, to develop an informant base. That is what we really need, which we don't have at this point.
Mr. GRAHAM. OK. Are we completely lacking in that area, or is there just a very weak effort in that area?
Mr. FREEH. We are almost completely lacking in that area. We depend right now on the information, intelligence and informants of the Russian police services, some of the other countries, to direct us toward people who are attempting to buy or sell these materials. Our own informant base is weak.
Mr. GRAHAM. Would you agree with this statement, that the United States is more at threat from a nuclear detonation now than during the height of the cold war?
Mr. FREEH. If you have described that nation as a criminal or terrorist or rogue operation, I think the answer would be yes, because the controls that were in place for many of these weapons and structures don't apply to a terrorist or an organized criminal, or an opportunist who could get access to them.
Mr. GRAHAM. One last question. Your counterpart from ItalyI don't want to butcher your nameI am very appreciative of your being here. I was stationed in the Air Force and served some time at San Vito and Aviano doing cases with the Air Force, and I know you are a very courageous man to have your job. It is a very tough group that you are fighting.
How would you evaluate the United States' effort in terms of putting resources on the table to make your job more effective? Do you see a lacking on our part in terms of resources, money and manpower?
Page 41 PREV PAGE TOP OF DOC Mr. DE GENNARO. Well, we received strong help coming from your country, and when I heard Director Freeh speaking about the Academy in Budapest, I recalled my personal experience that I received a sound education here attending your training course. So moving from my present experience and moving from the results that we collected in all of those years, I can say that the United States gave us a strong support and a strong helpespecially to convince ourselves that we could be able to win our fight against organized crime. It is a big pleasure for me to make this joint investigation against a new threat that you don't know, the Russian Mafia threat, and I am sure that with your organization, with the system to have some referring point for us, as the Legat or the agent in charge from DEA, we can exchange more quickly our information. We can have good results.
Mr. GRAHAM. One last comment. Director Freeh, if you will get to this Committee a wish list of what you would need to better engage the threat this country faces from nuclear devices in the wrong hands and the marrying up of the Russian and Italian Mafia, I think you will find a welcome response. I would encourage both of you to let us know what you need.
Mr. FREEH. Thank you, Mr. Graham.
Chairman GILMAN. [Presiding.] Mr. Fox.
Mr. FOX. Thank you, Mr. Chairman.
I wanted to ask both of you just this brief question. What do you think each of your countries is now spending on fighting the international terrorism and drug wars, as a followup to Mr. Graham's questions?
Mr. FREEH. I think if you take our budget, I think our 1998 requested budget is about $3 billion. I think if you take all of our counterterrorism operations, which are now over $250 million and our organized crime and drug program which is a combined program, I can get you an exact breakdown, but it is probably, of the total budget expenditures, upwards of 10 percent or more. And I am not sure with respect to the Italian National Police.
Page 42 PREV PAGE TOP OF DOC Mr. FOX. Is there a similar figure for Italy?
Mr. DE GENNARO. I don't have the details, but I can provide to you
Mr. FOX. It can be submitted later for the record.
[At press time, the material had not been submitted.]
Mr. DE GENNARO. Not for the terrorist, but for the law enforcement, we have a budget just for the Italian police, 10,000 billion lire.
Mr. FOX. Let me ask you this. One of my constituents is being held by the FARC in Colombia. Not only are they into drugs, but taking Americans hostages; yet the State Department has been reluctant to provide assistance to police officers like General Serrano. How can we fight these groups who earn $60 million per month on the cheap?
Mr. FREEH. I think we need to do two things. I think we need to support the very courageous and very effective police work that General Serrano and his colleagues perform in these cases. I think we need to work very closely and very carefully with the families, as well as participate from an investigative and evidence collecting point of view in the negotiations, when a ransom is being requested. We don't advocate the payment of a ransom. We certainly advocate and involve ourselves very directly with respect to working with the negotiating parties so we can collect evidence, identify criminals and, you know, our primary objective always to rescue and safely secure the victims.
Mr. FOX. Thank you.
Chairman GILMAN. Thank you, Mr. Fox, for keeping the hearing going.
Mr. HASTINGS. Thank you very much, Mr. Chairman.
And let me compliment both the witnesses on their presentations and thank all of the witnesses who are here.
Page 43 PREV PAGE TOP OF DOC Mr. De Gennaro, last week on Thursday leaving from Tashkent, Uzbekistan, I had the good fortune of traveling with an Italian female Senator who is the chair of the anti-Mafia commission. Her first name is Tina. I apologize for not being able to pronounce her last name. But we spent 5 1/2 hours at Frankfurt talking about what this testimony is about. And I want you to know that that was a rewarding experience for me, for she is a very skilled person and very committed, as are you, evidenced by all that has been said here today.
Mr. Chairman, I want to take a different tack and ask for us to understand, as you do, and to compliment you. This is the third or fourth hearing that I have attended that Chairman Gilman has called in some fashion related to the problems of organized crime in the world. I also had the good fortune of traveling with him to areas of vital concern to all of us. We even went, although he and I had some disagreements on that date, to Chiang Mai in Thailand and saw evidence of some changes, albeit small, with reference to the growing of the poppy seed by villagers way up in the mountains.
And at some point, we wound up in Pakistan and in Jordan talking with agents, Judge Freeh, that you have some responsibility for.
But, Mr. Chairman, you know something, of the 435 Members and 5 delegates in the U.S. House of Representatives, not enough of us are directly engaged in understanding the dynamics that these men and women work in, on a day-to-day basis. I would call for the Congress to reorganize itself in a different format than having hearings, having people come, having to stop and go vote. This problem is so pernicious, worldwide, and certainly for the United States, that at the very least all of the committees of jurisdiction of Congress ought to have designees that meet weekly with appropriate interagency, interparliamentary, intergovernmental, intermilitary and interpolice and law enforcement activities. To fail to do that allows that, because we have so much on our tables, things fall through the cracks.
Regardless of the needs, Judge Freeh has a responsibility to submit to us a budget, and I will go through this briefly, Mr. Chairman. But this problem is all-encompassing and a particularly important subject matter to all of us, and I think we need some new strategies, some classified, serious, long-term strategies, goals, analysis and reports so that we can address this problem to save, in the final analysis, humanity.
Page 44 PREV PAGE TOP OF DOC Now, when I was in Uzbekistan, Judge Freeh, I met with Stanley Escudero, the ambassador about to go to Azerbaijan, and he has requested of Mr. Constantine and others that there be DEA presence in Uzbekistan.
I was attending the meeting of the Organization for Security and Cooperation in Europe, and what happened at that meeting was almost every speaker mentioned organized crime in the Newly Independent States and the Caucasus. It is patently obvious that some of your assets, some of your resources, are going to have to be directed to that area, and there is some immediacy about it.
If those who are there are calling out for that assistance and we are not able to provide itI have learned, and you correct me if I am in error, that the nearest presence is in Pakistan to this particular region of the world. It is critical. Things have changed. Most Members of Congress have no clue about what those changes are. I am no expert and profess no expertise in that area, but I am sensitive enough and knowledgeable enough to know that we had damn well better learn real soon what is going on in Central Asia and the Caucasus as it pertains to organized crime. Otherwise, the horrors that are likely to be visited there we stand to lose in the long haul, both from an economic standpoint, social dislocation, the significant number of religious and geographic conflicts that I think need to be addressed.
Mr. Chairman, I have taken much longer than I had anticipated. If I had questions, and I will, and I will direct them to Director Freeh and ask if he would be so kind as to supply me, as best he can, at some appropriate time, which NIS and Eastern European cities that we have legal attaches in, which NIS countries' cooperation on casework is most advanced, and how much of the budget is directed toward that arena.
I am convinced that your legal attaches worldwide do a powerful amount of work with a small amount of resources, and we need to understand that.
Mr. Chairman, that is all, and I will direct a written request of Director Freeh so that he will know what I asked. And I thank you for your time.
Page 45 PREV PAGE TOP OF DOC Chairman GILMAN. Thank you, Mr. Hastings. The gentleman's time has expired.
Mr. FREEH. Mr. Chairman.
Chairman GILMAN. Just a moment, Mr. Freeh.
I welcome your suggestion about a special unit. We used to have a Select Committee on Narcotics. Let's put our heads together, and see what we can do.
Mr. HASTINGS. Thank you.
Chairman GILMAN. Director Freeh, a quick response and then to Mr. Payne.
Mr. FREEH. Yes. First of all, Mr. Hastings, let me commend you for your insight and your sense of urgency with respect to the problem.
We have asked for the 1998 budget to have the first FBI office in Uzbekistan; also in Kazakhstan. You are right, absolutely right, we cover that area out of Pakistan, which is only a Legat which is 1 year old. So it is a very new operation.
I met about a year ago with the President of Uzbekistan, President Karimov, who is desperately inviting not just the FBI, but the DEA into his country. It is a central operation for drug smuggling. The natural riches of that country, which are attracting many United States businesses and investment, need to be further strengthened by adequate police security. It is a country which has, as you know, I believe, two of the holiest shrines in Islam. It is a country which has very important contacts with Iran and a country which is friendly to the United States and wants our assistance.
So in addition to Tashkent, we have asked for agents in Almate. It is not a big investment of resources, given the dangers which you so correctly point out and the benefits to our country.
Chairman GILMAN. Thank you, Director Freeh.
Page 46 PREV PAGE TOP OF DOC Mr. Payne.
Mr. PAYNE. Yes. Thank you very much. The time is very short, but I wanted to have, first of all, an opportunity to welcome you, both of you. You were born in my district, so I certainly had to say that.
Of course, I went to Seton Hall. My brother went to Rutgers, so I can excuse you for that. Having grown up in Newark and long before the Appalachian meeting, there were those of us living in the northern part of Newark who knew about Cosa Nostra and so forth. You probably know the area that I grew up in, many years before you even went to elementary school. So there was not very much attention given to this problem.
I happened to be in Palermo a year or so after Magistrates Falcone and Borsellino were killed, with our Select Committee on Narcotics Abuse and Control, and at that time we were reducing the number of DEA agents when they should have been increasing, because the Medellin and the Cali cartels were starting to move powder cocaine into Europe through Italy when crack was not an issue in Europe; it was basically a U.S. issue, which was going contrary to beefing up the DEA rather than reducing it.
I also had the opportunity to talk to some Colombians just on yesterday, and terrorism, where there is some kinds of chemicals that can be made that can defoliage and kill the crop, but I understand that some major chemical companies in this country are reluctant to produce this because they are concerned about their executives in Colombia or in that region, and this is just really unbelievable that the underworld could control what a major corporation could do to help the eradication. I had a number of issues I wanted to bring up, but, of course, time is very short.
Finally, though, I had the opportunity to be in Dresden this summer with a number of U.S. Congress people and met with Russian and Eastern Europe Newly Independent States' legislators, and this question of extortion in Russia, which is the main problem, the old protection system that we had during the 1930's in this country, now with the privatization is going on. This tends to be the biggest organized crime move for immediate cash, and then they move into the other things.
Page 47 PREV PAGE TOP OF DOC I guess my question isand we don't even have time for an answer. I have a series of questions I would like to ask both of you in writing, but I think that we have to put more attention, more money, into this international situation. We spend a lot of money. You know, the money we spend in trying to keep an illegal Mexican from coming across the border, we could shiftand we should try to discourage people from coming across the border, but I look at that being less of a challenge to this country than this international Cosa Nostra group that is enlarging in itself, and with the EU having no borders, you are going to have people being able to simply move around Europe much more easily, as we have seen with NAFTA between Mexico and the United States.
And so I guess my plea is that we have our priorities put right and that maybe sometimes our fears of being overrun by people from south of the border may be less if we have scarce dollars than putting money into a real sophisticated, worldwide Interpol where everyone can work together, because the criminals are becoming much more sophisticated. When I grew up, they weren't sophisticated, when I was a kid. They are sophisticated now. We are not going to defeat them unless we become sophisticated.
Thank you, Mr. Chairman.
Chairman GILMAN. Thank you, Mr. Payne. Without objection, submit your questions, and I will ask our panelists to please respond.
[The information had not been supplied at press time.]
Chairman GILMAN. Mr. Rohrabacher.
Mr. ROHRABACHER. Well, I am sorry to bring up this particular issue, but the credibility of the FBI is of utmost importance when we are dealing with issues like this. If the integrity of the FBI is in doubt by the American people, then these other things that we are talking about and these requests are somewhat diminished.
Mr. Freeh, I want you to know, and I am going to put on the record right now, I was appalled when immediately after Dan Burton, a Member of our Committee, began the chairmanship and overseeing the hearings in an investigation into misdeeds by the President of the United States, that the FBI initiated a major investigation against Dan Burton. And I am deeply concerned about that.
Page 48 PREV PAGE TOP OF DOC I want you to know that it ruins the FBI's credibility with people in the U.S. Congress. Immediately after Burton beginshe chairs his Committee, all of a sudden the FBI has enormous resources to send people overseas to investigate Mr. Burton. I don't expect you to defend that, but I do want to know, did we ever come to a conclusion, after all of these years, as to how 900 FBI files ended up in the hands of a Democrat opposition researcher at the White House? Has there been a report? How did that happen? And I know you have very little time now, but has a report been issued on that, and was it determined who was responsible at the FBI for this?
I worked at the White House, and I know what protection FBI files were given prior to this Administration.
Chairman GILMAN. Mr. Rohrabacher, we have 4 minutes to go to the floor for a vote.
Mr. ROHRABACHER. I am going to miss this vote.
Chairman GILMAN. Fine. If you want to continue.
Mr. ROHRABACHER. Has this been determined by the FBI?
Chairman GILMAN. Mr. Rohrabacher, do you want to take over the Chair?
Mr. ROHRABACHER. That will be fine.
Chairman GILMAN. The panelists can then be dismissed after the Rohrabacher questions since we have another panel waiting to be heard.
Mr. ROHRABACHER. [Presiding.] I will try not to get off the subject except for this hearing, but please.
Mr. FREEH. There have been several reports that have been issued with respect to the White House files. In fact, one was an FBI report which I ordered done immediately after I learned about the first file going over there. The report was issued 10 days after my direction with a whole series of recommendations, which we immediately implemented.
Page 49 PREV PAGE TOP OF DOC There is another part of this investigation which Independent Counsel Ken Starr is now conducting, which we are not involved in except that he is using FBI agents, who he has requested, and who I have detailed there.
The issue and the main area of vulnerability to that system was as follows: Since 1968, we had a system in place where a preprinted, unsigned form coming from anybody in the White House would go to the FBI. It would go to the level of a GS8 or GS9 clerk. The summary of the file, not the whole file, would then go over to the White House for review.
There were no controls at the FBI with respect to tracking that summary, getting it back. This is a system that started under President Johnson and continued through every Administration up until 1996.
Mr. ROHRABACHER. These FBI files were only summaries?
Mr. FREEH. They are summaries, sir. They are not the raw files.
Mr. ROHRABACHER. Not the FBI files themselves?
Mr. FREEH. But they contain many of the matters and information represented in those files.
Mr. ROHRABACHER. All right.
Mr. FREEH. What we did and what I did immediately, 9 days after I learned of this problem, was to require a whole new system of request. The White House now has to prepare a written, signed form. They have to get the consent of the person whose summary they are requesting or write out the reason why they can't obtain it.
We keep control of those files. We require them to be brought back at a certain period of time. None of those controls, unfortunately, were in place from 1968 to 1996. I take full responsibility for having a system of that kind of vulnerability, and we have taken
Page 50 PREV PAGE TOP OF DOC Mr. ROHRABACHER. Mr. Freeh, when I worked at the White House for 7 years, people at the White House in the Reagan White House were not given access like this to FBI folders. People who needed to see certain information, and I know this is a fact because my friends were working in these various departments, including Chris Cox, who is now a Member of Congress, and including people who I know who were engaged in personnel decisions, and the FBI agents would sit right there, and you would only be able to read a certain amount of the file; couldn't even read the whole file.
We ended up with 900 of these. Of course, the President first claimed it was only 50, and then it went up and up and up.
Let me just say that I personally want to see this issue resolved, because when you come here before Congress on issues of this magnitude, the FBI has to be trusted. We have to know that you are operating on a totally nonpolitical basis, and I remember your response to this when the word came out about what had happened, but I want to make sure this is resolved, and I want to see who at the FBI is being held accountable for this, because if you can't decide who is going to be held accountable in the FBI for a breach of security of this magnitude, how are we to trust the FBI to track down drug dealers and other people that are much more sophisticated? This seems to be a relatively easy path to follow.
With that said, I think you understand the point I am making.
Let me just ask you some questions about this drug situation. We seem to have drugs in two places right now, at least heroin, coming out of Afghanistan and Northern Burma. How much cooperation are we getting from the Chinese Government and how much of these illegal narcotics are coming through China?
Mr. FREEH. We have, of course, heroin coming from those sources. We also have some of it coming from Mexico. We have the Colombian cartels now growing poppies, and we think over the course of time we will start to displace some of the Eastern and Asian trafficking.
Page 51 PREV PAGE TOP OF DOC In response to your question, we have worked with the Ministry of Public Security, which is the Chinese law enforcement authority. DEA has worked with them. We have FBI and DEA agents in Hong Kong. We have requested now that they be allowed to reside in the Embassy in Beijing. We have worked some cases with them, with very successful results. They have cooperated with us. We have cooperated with them.
We do not have, however, the police-to-police relationships and infrastructure that we have with our Italian friends and colleagues, and even the ones that are developing in other parts of the world.
What is necessary in that regard is the operational and working relationships between their police authorities and ours. We have not had that for a number of reasons.
Mr. ROHRABACHER. Let me note that we have several members of the Colombian National Police with us today, and the Colombian National Police have given of their blood and sacrificed their lives in this battle, and this Congressman and I know all of my colleaguesI am sorry, they are off voting right now. I am missing a vote to be here, and let me note that I am very happy to be here and we are very proud of the alliance between our own law enforcement agencies and the Colombian police. We salute you. This takes tremendous courage on the part of these individuals.
Is there anywhere near this type of commitment that we see in Colombia in China?
Mr. FREEH. No, certainly not at that level. We have worked cases on a sporadic basis, sometimes with success, sometimes without. We do not have a General Serrano in the PRC that we know about. We do not have the dedicated officers who are not only present here, but represented in their absence. We need police relationships with the Chinese officers who are on the ground and can deal with the issues that we need to.
Page 52 PREV PAGE TOP OF DOC Mr. ROHRABACHER. Considering China's relationship with Burma, and the Burmese dictatorship are up to their eyeballs in the drug trade, and the fact that Burma is the source of so much of this heroin, I would hope that the President in the upcoming visit of the current Chinese Communist strongman, I hope that the President mentions this as a priority for the United States to prevent China from being a transit center and also a source for drugs coming into this country.
Again, I hope that my questionI mean, obviously it is disturbing, but you have to know that. I expect a high level of integrity out of the FBI, and this Administration has done things that I think undercut that.
And with that said, I would like, if possible, the FBI report on how this transpired so that I can actually peruse it.
Mr. FREEH. I will deliver it to you today, sir.
Mr. ROHRABACHER. OK. And if possible, my office has been deeply involved in the Cambodian situation, and the FBI apparently has a report about the grenade attack on Hun Sen's opponents. If the FBI could make that available to my office, I am a member of the International Relations Committee and I specialize in Southeast Asia, so I would appreciate it if the FBI would make that available.
Mr. FREEH. We will certainly arrange a briefing for you, sir.
Mr. ROHRABACHER. OK. Thank you very much. I would like to thank this panel and, first of all, express my appreciation that you understand that in a democratic Parliament or Congress such as this, we have Members with many different responsibilities. Even right now I am giving up a vote on the floor to finish up discussion with this panel. We appreciate you very much for coming over. And we have our Colombian friends here, we have a man who has traveled with us here from Rome to be with us, and that really is significant of the commitment that we are talking about in this battle against evil that you are engaged in.
Page 53 PREV PAGE TOP OF DOC So I thank the first panel. And we have a second panel with us today. I appreciate you joining us.
Just one note to our Colombian friends before they leave. I know that especially the Colombian police, but the Colombian Government, Colombian people have admonished the people of the United States that we have got to do something about the demand for drugs here and not totally rely on you shedding your blood in the battle against the supply of drugs. Many of us have heard your plea, and we take that very seriously. Again, thank you so much for the courage that you have shown.
Mr. ROHRABACHER. All right. I would like to welcome the second panel. I know Mr. de Borchgrave, who is a friend and well known in this area, has another appointment; Mr. de Borchgrave, could you care to move forward and then we will move forward with the rest of the panel after your statement.
STATEMENT OF ARNAUD DE BORCHGRAVE, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES
Mr. DE BORCHGRAVE. Thank you, Mr. Chairman. I have focused on the Russian aspects of transnational crime because of the CSIS report that has just been released.
On September 24th, President Yeltsin said that ''criminals have today brazenly entered the political arena and are dictating its laws, helped by corrupt officials. They can penetrate everywhere,'' he said, ''unless the whole of society, from top to bottom, joins in an effort to eradicate this scourge. Our policy on this will be very tough.''
This was Mr. Yeltsin's seventh crackdown in 6 years against organized crime and corruption. Three years ago, it was President Yeltsin himself who called his own country, the Russian Federation, with 150 million people and over 20,000 nuclear warheads, the biggest Mafia State in the world, the superpower of crime, that is devouring the State from top to bottom.
Page 54 PREV PAGE TOP OF DOC Grigory Yavlinsky, the leader of the reform Yabloko party and a declared candidate for the Presidency in the year 2000, was in Washington last week when he said, and I quote, ''A corrupted system of criminal power has been established in Russia and now poses the main threat to the economy. Not a single widely publicized murder has been successfully investigated in Russia over the last 5 years. A political will rather than the criminal code is needed to break the stranglehold of crime and corruption.''
While there are numerous investigative stories by reporters covering Russian organized crime, there is no comprehensive study assessing the breadth and depth of the threat, the extent to which organized crime and corruption are undermining privatization in Russia and Russia's transition to a market economy; and perhaps most important of all, examining the implications of U.S. policy toward Russia.
CSIS released such a study September 29, the result of 2 years of work via a task force made up of experts drawn from the intelligence, law enforcement, corporate and academic communities. The report's key findings and a summary of its recommendations are attached to this testimony, Mr. Chairman, if you would be so kind as to have them inserted in the record.
Chairman GILMAN. [Presiding.] Without objection.
Mr. DE BORCHGRAVE. Our report focuses more than simply on the organized crime problem in Russia. Much of the Russian State and economy is now on the verge of becoming a criminal oligarchy dominated by, one, corrupt officials at all levels of the bureaucracy, from government minister to tax collector to low level bureaucrat; two, successful, full-time professional crime syndicate bosses; three, businessmen for whom existing Russian law and Western norms of commerce are simply obstacles to be overcome in one way or another.
Russia's No. 2 military prosecutor captured the crime crisis well when he said that Russia is faced with, ''the wholesale criminalization of the life of our entire society, every pore of the State mechanism is steeped in corruption and abuse.''
Page 55 PREV PAGE TOP OF DOC About two-thirds of the Russian economy is under the sway of organized crime, including 40 percent of private business, 60 percent of State-owned enterprises and more than half of 1,740 banks. Those are estimates of the MVD, Russia's Interior Ministry. Crime syndicates enjoy the protection of the ruling oligarchy, which consolidated its power during Mr. Yeltsin's illnesses in 1996 and early 1997. Two hundred of Russia's largest crime gangs are now global conglomerates, and, as you heard from Director Freeh earlier today, there are 284 pending criminal investigations of Russian organized crime involvement with their U.S. counterparts.
Former First Deputy of the Economy, Vladimir Panskov, recently wrote in Pravda that $250 billion leaked from Russia over the last 4 years. The Bank of France estimates that in 1994 Russians invested $50 billion in some 30 Western countries. Interior Ministry Kulikov's own estimates range all the way up to $300 billion in 5 years.
By way of comparison, total Western aid to Russia, including bilateral, principally Germany and all international institutions, is $74 billion.
In his speech to the Upper House of Parliament last week, Mr. Yeltsin said he was considering an amnesty for those who have squirreled their ill-gotten gains abroad with a levy of 10 to 15 percent of the sums involved to be paid to the State. The old Soviet nomenklatura, with the help of criminal organizations, privatized the economy into their own hands selling off State assets rather than creating new ones, and exporting capital rather than creating it.
The rule of law has been displaced by criminals and gang chieftains who are de facto adjudicators. Krysha, or roof, are the protection rackets that have replaced legal functions and safeguards.
The first round of privatization supervised by Anatoly Chubais, now First Deputy Prime Minister, consisted of rigged auctions in favor of preselected individuals or banks, with crime syndicates the principal beneficiaries. The Analytical Center of the Russian Academy of Sciences estimates that 55 percent of the capital and 80 percent of voting shares were transferred during the privatization process into the hands of domestic and foreign criminal capital.
Page 56 PREV PAGE TOP OF DOC The Attorney General reports over 2,000 privatization crimes in 1996 alone, and his military counterpart says there are 6,000 cases of high-level corruption in the military establishment.
But the Attorney General says he is greatly troubled by the extremely incoherent official policy of counteracting crime. Practically no money has been allocated to anticrime programs, and he concludes that the fight against crime is a facade. Law enforcement agencies, according to Mr. Yeltsin's own Kremlin analytical service, have been thoroughly compromised by organized crime.
In 1997, as an example, Russia's Central Bank reported that three commercial banks between them had diverted some $500 million in Federal budget funds into high-yielding securities markets. The banks claimed market losses. The money vanished, and the government was powerless to get its money back.
Today Boris Nemtsov and Chubais, both First Deputy Prime Ministers, are engaged in mortal combat to wrest control of the economy from a semicriminal oligarchy. A plot to assassinate Chubais was uncovered 2 weeks ago, and his close ally, the Deputy Governor of St. Petersburg, a leading reformer, was gunned down on the city's main thoroughfare this summer. His name was Mikhail Manevich, and he was scheduled to report the very next day on organized crime's involvement in privatization scams.
The limited successes of Chubais and Nemtsov are invariably matched or even exceeded by developments engineered by the oligarchy they are powerless to cope with. These two reformers do not control the security services or law enforcement.
The broad impact of the crime-dominated State for U.S. foreign policy is illustrated by recent allegations that Russian Space Agency director, Yuri Koptev, was involved in transferring missile technology to Iran. Going against official Russian policy, Koptev was motivated, or allegedly motivated, by personal financial considerations.
Page 57 PREV PAGE TOP OF DOC Our report, Mr. Chairman, dispels the widely held perception that Russia is a market economy run by a hot team of reformers. Many have argued that Russia's struggle against organized crime and corruption is the primitive accumulation period of early capitalism, much like the U.S. robber barons of the late 19th century.
A World Bank report says this is a dangerous assumption that does not hold up to critical analysis. America's early entrepreneurs rode roughshod over laws to create huge industrial enterprises that were of enormous value to society as a whole. Profits were plowed back in the United States, not sent abroad for safekeeping in anonymous bank accounts.
In the United States, there was a self-correcting political and legal system that curbed the excesses of the robber barons, and capitalism matured. In Russia, former Communist party officials, KGB operatives and organized crime syndicate chiefs sold off State assets, did not create new ones, and moved scores of billions of dollars of plunder abroad instead of reinvesting it in Russia.
Our report sets out to shed light on thison the picture that Mr. Yavlinsky describes as a false one. You will find the key findings on page 10 in the summary of its recommendations on page 12.
Mr. Yavlinsky says the path which Russia is traveling cannot be hidden forever, and the longer it is concealed, the higher the price will be for everyone.
By way of conclusion, Mr. Chairman, the big battles that remain to be fought will determine whether Russia follows the road to the rule of law in the United States and in Europe, or the one that leads to the consolidation of crime-dominated oligarchies that now have worldwide implications given the fact that they have established relations with counterparts in 50 foreign countries.
Thank you, Mr. Chairman.
Chairman GILMAN. Thank you, Mr. de Borchgrave.
Page 58 PREV PAGE TOP OF DOC [The prepared statement of Mr. de Borchgrave appears in the appendix.]
Chairman GILMAN. Arnaud de Borchgrave is by no means a stranger to our foreign policy matters. He was Newsweek's chief foreign correspondent covering most of the world's major events since 1950, and served as Newsweek's senior editor for 25 years, and is a recipient of countless awards for distinguished journalism. He left his post as editor-in-chief of the Washington Times in 1991 to resume his role as one of the Nation's foremost political and policy commentators and is now editor-at-large for the Times. He has also been appointed as senior advisor at the Center for Strategic and International Studies, where he currently directs a project on global organized crime and recently published a study on organized crime.
I think it is a must read for anyone that is seriously interested in understanding both the extent and depth of the problem, and we appreciate your being here today and sharing once again your knowledge and analysis of what we are confronted with.
Now, we move on to Dr. Louise Shelley, professor in the Department of Justice, Law and Society and School of International Service at the American University. Dr. Shelley is the director of the Center for Transnational Organized Crime and Corruption in America. Dr. Shelley is a leading U.S. expert on crime law and law enforcement in the former Soviet Union and is an advisor to our government on the problems of post-Soviet organized crime.
Dr. Shelley has testified before the Congress on several occasions. She is the author of Policing Soviet Society, as well as numerous other articles and book chapters. At present, Dr. Shelley is conducting a program in coordination with Russian specialists in four cities on the problem of organized crime. This program was recently expanded with the aid of additional funding from the U.S. Department of Justice and the U.S. Agency for International Development.
Chairman GILMAN. Dr. Shelley.
STATEMENT OF LOUISE SHELLEY, PROFESSOR, DEPARTMENT OF JUSTICE, LAW AND SOCIETY AND SCHOOL OF INTERNATIONAL SERVICE, THE AMERICAN UNIVERSITY
Page 59 PREV PAGE TOP OF DOC
Ms. SHELLEY. Thank you. My testimony will consist of two parts, the first based on an article that I just published in the Foreign Service Journal that addresses the need for a coordinated national policy to address transnational organized crime. The second part will focus on recent successes that we are having in American/Russian cooperation to fight organized crime. As you have asked to have the article introduced into the record, I will just briefly summarize it.
Chairman GILMAN. Without objection, the article will be made a part of the record.
[The information referred to appears in the appendix.]
Ms. SHELLEY. Thank you. In this article, I say that organized crime will be a defining issue of the 21st century as the cold war was for the 20th century and that colonialism was for the 19th century. Transnational organized crime will proliferate because crime groups are the major beneficiaries of globalization. The International Monetary Fund estimates that drug trafficking now accounts for 2 percent of the world's economy, and that if you add illicit capital flight and money-laundering activity, you are dealing with a multiple of that.
So you are already dealing with a significant share of the world's economy, of which I am sure Mr. Blum is going to talk about some more. And as this money is untaxed, invested in very profitable and high-risk investments, it continues to grow and will assume a larger portion of the world's economy in the next century.
In this article, I say that we can make no easy generalizations on where organized crime groups will spring up. They exist in societies as diverse as Colombia, Italy, the former Soviet Union, all of them which we have talked about in the first panel this morning. So the answer is not necessarily to predict where they are to arise, but what we need to do to address them.
Page 60 PREV PAGE TOP OF DOC One of the things that I point out is that this is not just a law enforcement problem. It affects every part of our foreign policy, as we have talked about military issues. It affects consular affairs of people who are entering into our country. It affects administration of embassies overseas and what contractors we are dealing with. It affects political issues. It affects aid policy, as we are trying to promote democratization and economic reform, and organized crime undermines these developments.
So for this reason, we need Congress to take a lead in developing a coherent policy that can then be enforced by the Foreign Service, by the Administration, to address this problem.
Second, I want to deal with a little bit more of what is going on in the field in Russia, even though the problems that we are discussing today are not confined solely to Russia, but are problems of the entire former Soviet Union and much of the Eastern Bloc.
Seventeen months ago, I came here and gave a very negative assessment of Russian organized crime. My assessment has not changed, but I will show that there is much coming out of cooperation between Russia and the United States that is not just based on what the FBI is doing. It is expanding into other areas. And there are two things that I have been involved with, or the Russian organized crime centers have been involved with, that are showing high-level cooperation.
On Friday, I leave with a delegation of five individuals from Justice, Customs, INS and FBI, for a roundtable discussion that will be held in the Russian Duma next Thursday and Friday chaired by one of the most powerful members of the Duma, the Chair of the Committee on State Security, he will be hosting this roundtable with the Committee on Women and Children, to discuss the very serious problem of trafficking in women and children. This roundtable had been put together by the Russian organized crime center that is working with the Duma and with the cooperation of our government. This will be followed up in November by a meeting in Irkutsk, in Siberia, which has just been authorized last week by the Attorney General of Russia. The November meeting will be attended by the Deputy Attorney General of Russia to help plan an Asian strategy to deal with organized crime.
Page 61 PREV PAGE TOP OF DOC Our group is involved with this. We have brought in and are working with Asia Foundation to develop this. Senior prosecutors are going to be brought in from Korea, Japan, China, Mongolia and, of course, the United States, who are working on Russian and Asian organized crime, to work and develop a strategy with the Russian Government.
The Russian Attorney General has authorized the funding to host this meeting, and we are supplementing it with some of the logistics.
This represents cooperation not just with the MVD, but with the Parliament and with the Attorney General's Office, and the first kinds of activities of joint projects that we are sponsoring.
It is, I would say, unprecedented, and I think it is important if we remember that our effort against organized crime in the United States really began in the 1950's with parliamentary hearings. We are going to be having a parliamentary roundtable on this serious problem of trafficking in women and children, which is going to be followed up in December as a result of a parliamentary decision with formal hearings at that time.
How did we get to this point? And what can we learn from the lessons of how this has moved? First of all, we have had cooperation from the USIA that has brought over many of the scholars and also members of Parliament who have learned that there is much to be achieved through cooperation with us. Justice personnel stationed in the field to understand the culture and the political environment have been invaluable. Creative members of the Embassy and the coordinator staff spent much time taking this program that started out as a seed activity of the MacArthur Foundation into something that is now run and funded with the support of the U.S. Government.
And I should point out that it took a long time for the bureaucrats to figure out how to put this together, this program of scholars turned into activists who didn't fit into any particular program of the U.S. Government, but supported our overall policy objectives. And once the U.S. Government came on board and supported this program, which was in late spring of this year, we have had high-level Russian cooperation with absolutely breakneck speed.
Page 62 PREV PAGE TOP OF DOC In preparation for these two meetings, I can barely keep up with the e-mails and the faxes that are coming, of cooperation from the Russian side.
I have articulated 12 points that we need to address of lessons that we have learned from this experience, of how to develop cooperative relationships that are useful not only for the Russian case, but will be useful in other parts of the former Soviet Union and elsewhere as we develop cooperative relationships to fight organized crime. And paramount among these is developing local initiative, having people on the ground who understand the problem, helping target efforts that we work with in cooperative relationships, empowering our colleagues, and having research to establish sound policies.
Some of these lessons, as I point out, are things that we first observed in working in cooperative relationships with our Italian colleagues, and we are discovering the same things are also useful in the Russian experience.
I think it is important to understand that this incredible momentum that we have gotten in the last few months with cooperation from the top levels of Parliament and the Attorney General's Office of having the Russians making a financial commitment to cooperative projects as well is something that should not be stopped. It needs to be sustained, and we need to be involved in these projects for a long term. We shouldn't be just providing large amounts of assistance now and phasing them out, just when things are beginning to blossom in a cooperative relationship. These programs are not expensive and can be sustained over a long time and produce results as we find our Russian colleagues who find these worthwhile bringing in more and more of their own financial resources to the table.
Second, we must have our Russian colleagues help direct our efforts. We must broaden our partnerships as we have done with Asia Foundation, broadening the dialog and bringing more people into the integrated strategy. We must be working with the Parliament, the Ministry of Interior, the bureaucracy, the Presidential Administration, the NGO's and the press. And we must continue to work with Russians as equal partners, remembering that we are there at their invitation.
Page 63 PREV PAGE TOP OF DOC Thank you.
Chairman GILMAN. Thank you, Dr. Shelley, for your extensive testimony.
[The prepared statement of Ms. Shelley appears in the appendix.]
Chairman GILMAN. Now we are pleased to hear from Mr. Jack Blum, an internationally known attorney, who is a partner of Lobel, Novins & Lamont, a Washington law firm. As a Senate investigator, he played a central role on uncovering some of the most significant international scandals of the last 20 years, including BCCI, General Noriega's drug trafficking, Lockheed Aircraft's overseas bribes and ITT's effort to thwart the election of Salvador Allende in Chile. He has been a consultant to the U.N.'s Center on Transnational Corporations and a member of foreign governments. He is presently senior editor of the journal Crime Law and Social Change. He is a guest lecturer at the Foreign Service Institute and a member of the adjunct faculty of George Mason University.
I am pleased to note that Mr. Blum was formerly a journalist in the Hudson Valley of New York.
STATEMENT OF JACK BLUM, ATTORNEY AT LAW, LOBEL, NOVINS & LAMONT
Mr. BLUM. Thank you, Mr. Chairman. I have a prepared statement. I would appreciate it if you would make that a part of the record with the addenda, and I will make some brief remarks.
Chairman GILMAN. Thank you. Without objection.
Mr. BLUM. I think there are some things that have to be added to what has been said. One thing I should say is that the three of us talked before this testimony began, and we thought, my God, we have copied each other's testimony without ever collaborating, because we agree on so many of the fundamental points.
Page 64 PREV PAGE TOP OF DOC There are a few things, though, that I would like to add that are a little bit different. First, the really large problem that is coming in international organized crime is in the area of financial fraud. It has been overlooked because it is not as dramatic, it is not as glamorous, but I would argue it is probably, in terms of social implications, the most dangerous of all.
We have already seen Mafia-related stock fraud using offshore corporations, using various hideouts, in the international system, to manipulate stock market prices and take advantage of investors here in the United States.
The fraud is also aimed against banks. We have seen it in the Daiwa Bank fraud, the Sumitomo fraud, the Barings Bank fraud, and these are, I believe, the tip of the coming iceberg.
The problem is who has the authority to investigate? Whose job is it to police the international financial system? And in the end, how will you ever bring any of the perpetrators to justice or recover any of the money?
One difficulty is this: Where was the crime committed? There was the European Union Bank of Antigua, which operated on the Internet on a license from the corrupt Government of Antigua. The computer server that handled the bank was in Washington, DC. The man who was operating the computer server was in Canada. And under Antiguan law, the theft of the bank's assets was not illegal.
So now the problem is, where is the crime committed? Who committed it? Who is going to investigate it? And will anyone ever go to jail?
I mentioned Antigua because it is so obviously corrupt and so obviously selling its sovereignty to criminals. It is one of about 50 countries worldwide in the business of selling national sovereignty and protection from the criminal laws of other countries.
I have attached, perhaps for your horror or amusement, depending, a Web site offering of a passport from the island of Dominica where for a cash payment you can get a passport and a name change. The ad on the Web site says, ''It is perfect for someone who would like to leave his past behind.''
Page 65 PREV PAGE TOP OF DOC I think it is, and I think the world community has to be aware that Dominica is only one of dozens of countries that are offering deals like that.
There are as many as 50 countries that are offering secretly owned offshore corporations, no taxes. The one condition is that the corporation must do no business in its home country. And these corporations provide the place to hide the money, to open the secret bank accounts, and, in effect, are a platform for fraud.
Finally, the question of travel documents and fraud, I think that the passport and visa issue is one this Committee will have to examine. Worldwide, the system of visas and passports has collapsed. You can buy documentation that will get you in almost anywhere. The only question is how much you want to spend. And the ability of our consular people and our embassies to control who comes into the United States, I believe, has disintegrated.
Finally, I should mention the issue of the sacred cows of our system. Director Freeh was very hard on Iran. Nobody mentions Turkey, where the corruption is appalling, where the connections between drug dealing and various other forms of organized crime are rampant. And that is because Turkey is considered an ally, a NATO friend, coming into the international community and the European community.
A drug dealer President has just been elected in Bolivia, and everyone has forgotten that this man is and was involved in running a cocaine government. Our government is dead silent. President Banzer needs some attention.
There is a situation in Africa with Sierra Leone and the Nigerians. The Nigerians have invaded Sierra Leone and are using it as a platform for the smuggling of heroin. These are the kinds of problems that are going to come up as long as we have governments that are in the business of aiding, abetting and supporting organized crime. The international legal system is simply not equipped to deal with it.
I will end my comments there and would welcome any questions.
Page 66 PREV PAGE TOP OF DOC Chairman GILMAN. Thank you, Mr. Blum.
[The prepared statement of Mr. Blum appears in the appendix.]
Chairman GILMAN. Thank you, all of our panelists, for your excellent submissions today.
Mr. de Borchgrave, why hasn't the Administration been willing to admit the extent and danger from, and the impact of Russian-speaking organized crime? Why is this such a latent issue?
Mr. DE BORCHGRAVE. Well, I think you have heard this morning the difference between the diplomatic and academic approach to Russian organized crime, and perhaps I should categorize it as a reportorial one. We have on our task force dealing with Russian organized crime, whose report has just been released, about 30 experts from the law enforcement, intelligence, corporate security communities, and most of them are frequent travelers to Russia. We come up with what is really going on, it seems to me, from top to bottom.
And who am I, Mr. Chairman, to disagree with Mr. Yeltsin himself, who says, and I repeat, criminals have today brazenly entered the political arena and are dictating its laws, helped by corrupt officials. They can penetrate everywhere. They have penetrated everywhere. But we are somehow trying to differentiate on the diplomatic front between Russian organized crime and the government apparatus. There is no distinction between the two.
Chairman GILMAN. Why is it that we don't hear more from our policy people in the Administration with regard to the seriousness of this issue?
Mr. DE BORCHGRAVE. I think there is a reluctance in the diplomatic community, and it is not only in the United States, it is among all like-minded democratic nations, Mr. Chairman, to sweep all of this under the rug, rather than to try to help the people who are determined to come to grips with organized crime and corruption in government.
These are the people we should be helping, and what we are doing is really responding to Mr. Yavlinsky's call, who said, why doesn't the United States tell the truth about what is going on and help the people who are determined to change the system?
Page 67 PREV PAGE TOP OF DOC Chairman GILMAN. Failure to rock the boat.
Do any of our other panelists want to comment on that question?
Ms. SHELLEY. I think it is the problem of an overall mentality that crime is a dirty issue; that it is strictly a law enforcement issue and is not something that commands general attention from the Foreign Service, or from our diplomatic policy. And it takes a whole reorientation of our thinking and our diplomacy, and just as you have taken the leadership on this, Mr. Gilman, and Mr. Hastings was talking about earlier, of how we have to reconceptualize these issues, I think that is part of the problem and thinking of organized crime in terms of consular, military, all of the diversity of issues it touches, and it is not just biting off a small piece of it. It is a reorientation that demands a much more strategic plan from our government.
Chairman GILMAN. Mr. Blum.
Mr. BLUM. I would just add that there is a terrible reluctance in our government to confront other governments with terribly unpleasant realities. I recently participated in an AID program for Latin America called RESPONDACON IV, which was a teleconference on controlling corruption throughout the hemisphere. There was one country in Latin America where the U.S. Embassy said, sorry, we don't want it, and we really shouldn't have it in the country, because it will make everyone uncomfortable; and the country was Mexico.
Now, if we can't have a teleconference in which Latin Americans are talking frankly about what they are doing to control corruption broadcast in Mexico because it will upset people, how can we deal with governments that are, frankly, controlled by organized crime?
Chairman GILMAN. You know, back in July of this year, we wrote to Under Secretary Pickering noting the serious nature of the threat from corruption, organized crime, to reform a democracy in Russia today, and we asked a very simple request, that there are only two FBI agents permanently assigned to the U.S. Embassy in Moscow, and that a request for one additional FBI agent had languished for over 2 years, since July 1995, and we still don't have a proper assessment. The letter that I had introduced into the record from the State Department dated September 30th, 1997, from Barbara Larkin, said that once Ambassador Collins reaches Moscow and has the time to assess the situation on the ground, he will be in the best position to make decisions regarding the right number and mix of U.S. law enforcement personnel required to meet our needs in Russia.
Page 68 PREV PAGE TOP OF DOC I don't understand why it takes 2 years to make kind of an assessment for one FBI agent.
Mr. DE BORCHGRAVE. I have experienced this during my journalistic career, Mr. Chairman, especially during the period of detente. There was a reluctance that bordered on the paraplegic to face up to certain unfashionable or unpalatable facts of geopolitical life insofar as the Soviet Union was concerned.
The Soviet Union, we had all sorts of evidence, was aiding and abetting international terrorist movements with safe havens in Czechoslovakia and East Germany. This was denied. We didn't want to rock the boat of detente. This was considered very irresponsible reporting.
Since the end of the cold war, we now have the evidence this was, indeed, going on. And I find myself in a very comparable situation today.
Chairman GILMAN. I thank you for your comment.
Dr. Shelley, when technology outstrips the law, and international criminals and terrorists take full advantage of these developments, what can free and open societies like ours do to combat that?
Ms. SHELLEY. That is the next paper I am writing.
Chairman GILMAN. Good. Don't forget to send us a copy.
Ms. SHELLEY. The challenges are enormous, and I think it is something that we need to give much, much more thought to. In a journal that I edit, called Trends in Organized Crime, we first addressed this about an issue or two ago, and it is this globalization that is not only in tangible goods, but intangibles, that I think needs much, much more consideration.
And in this conference that we are sponsoring in a week, the Russian/American Conference on Trafficking and Exploitation of Women and Children, one of the things that we are addressing is pornography on the Internet. Because of the enormous capabilities of Russians in the computer area, this is an area that we are trying to address before it becomes really large-scale, and the Russians are just beginning to pay attention to the area of computer crime.
Page 69 PREV PAGE TOP OF DOC So one of the things that we are trying to do is to couple our experts with their emerging experts to try and do something early. But that is just between two countries. There needs to be much, much more done in this area. And I think there is also a tremendous lack of awareness among the technological community on what needs to be done.
Chairman GILMAN. Thank you, Dr. Shelley.
Mr. BLUM. The technology has blown away legal concepts that we have worked on for centuries. The concept of jurisdiction is gone.
Ms. SHELLEY. Yes.
Mr. BLUM. The notion that there is physical presence in a place and that place is the place that will investigate, try and control criminal activity is finished. If you can have a bank in Antigua that has no presence there, but it is considered Antiguan for legal purposes, you have got a devil of a problem.
We have got to get over that, and we have got to find ways to get around the jurisdictional hang-ups and the assertions of jurisdiction that countries use to protect criminals. That is one issue.
The second issue, which is incredibly important, is the issue of the technology of border control, forgery, and counterfeiting of passports, travel documents and whatever. And the cutbacks we have made in terms of consular officials and the lack of control of visa process in American embassies has made it possible for damn near anyone to get into the country, and we are going to have to look at and totally change the way we control the border or the whole system will collapse.
Chairman GILMAN. Thank you, Mr. Blum.
Mr. de Borchgrave.
Mr. DE BORCHGRAVE. Mr. Chairman, our report on cybercrime, cyberterrorism and cyberwarfare, the CSIS report, will be out in December addressing many of these problems.
Page 70 PREV PAGE TOP OF DOC Chairman GILMAN. We look forward to reading that.
Mr. DE BORCHGRAVE. In a digitalized global economy, income streams can no longer be linked to geographic locations, and it seems to me that our policy planners and decisionmakers have yet to come to grips with this superhighway where traffic moves at the speed of light, which spans the globe, where there are no traffic lights, no speed cops, no international borders, no need for customs, immigration officers or tax collectors; and more alarmingly, Chairman, an environment that tends to leave law enforcement in the dust.
We still refuse to face up to the fact that the traditional prerogatives of national sovereignty have not only been challenged by the information revolution, they have largely ceased to exist; and that things like logic bombs and Trojan horses and worms and viruses are the new arsenal in a new geopolitical calculus whereby nonstate, substate or even individual actors can take on a superpower. This is what we have to face up to.
Mr. BLUM. Just to underline that
Chairman GILMAN. Mr. Blum.
Mr. BLUM [continuing]. There are now $5 trillion in offshore tax havens, booked in offshore tax havens. There are more than a million offshore, anonymous corporations, designed for the sole purpose of concealing the origin and destination of money. That should shock people.
Chairman GILMAN. The Italian police today expressed concern about alliances between La Cosa Nostra and the Russia Mafia. What will Russian Mafia-controlled banks and alliances with the Italian Mafia, Colombia drug cartels and others mean for any effort to get money laundering under control? How can we do that with all of these potential alliances?
Mr. BLUM. We have had precisely that go on with banks in Antigua where Russians are lounging in the hotels, waiting for their meetings with the Mafia people coming up from Colombia, and where the Italian Mafia is also operating.
Page 71 PREV PAGE TOP OF DOC The island of Saint Martin, Dutch Sint Maarten in the Caribbean, has had combined operations by the Colombians and the Italians, and no one has been able to get it under control. And what they do is they rely on the independence of the Netherlands Antilles, the inability of the Dutch to do anything, and the fact that this is all out of the reach of both the Colombians, the United States and the Italians.
Chairman GILMAN. Thank you.
I just want to put one letter in the record, the July 17th letter, from my office to Honorable Thomas Pickering, Under Secretary of Political Affairs, that I read, and I noted before, and make that part of the record without objection.
[The letter referred to appears in the appendix.]
Chairman GILMAN. Mr. Sherman.
Mr. SHERMAN. Thank you, Mr. Chairman.
Our country spends a huge amount of money on national security, and we are not very secure. I am convinced that the most powerful force in the universe is inertia, and for that reason we continue to focus our security dollars on the threats of 1945 or 1965, and the shadow of those needs continues.
It is not completely useless to have the capacity to fight a huge tank war in the middle of Europe. It could happen. But if you have to weigh needing that security defense versus defense from what these panelists have told us about, if we weren't so caught by inertia, we would be redirecting our security dollars.
One thing that concerns me is that we are assuming new security obligations for our country without making our own country as secure as it ought to be, and I will give one example, and that is we are talking about adding the Czech Republic, Hungary and Poland to NATO. This is going to be an extremely expensive expansion of our security perimeter.
But we don't insist that those three countries cut off all of their trade relationships with Iran. So we will be giving a whole new level of security to those three countries in their beginning democracies while they will be engaging in business as usual, for their own profit, with a country whose nuclear development program is perhaps the greatest threat to the physical security of Americans.
Page 72 PREV PAGE TOP OF DOC Likewise, we are told to focus on a Caribbean Basin initiative that hasn't actually made it through this Congress, that would provide large economic benefits to the very countries that have the bank secrecy laws, et cetera, that have been brought to our attention by our panelists.
Now, there are a number of, I will call them bad ideas, they are unpopular ideas, and they are ideas that I don't necessarily endorse, that I think I would like to hear our panelists comment on either now or in written submissions, because I am sure some of these are genuinely bad ideas and should not be pursued, but I would like to bring them up.
The first is that we invest more in fixed border defenses for the United States; that we make it difficult and even very, very dangerous to cross our border in places that are not appropriate.
The second is that we make it clear to our NATO allies that our securityand they are obligated to provide it just as we are obligated to provide for theirsdepends upon changes in their laws, in their treatment of rogue States and in such simple things as the issuance of bearer bonds, which we have just recently, for the most part, discontinued, but which are, in effect, floating secret banks.
The third is that we look at treating as rogue States not only what I call the blue collar criminals, Sudan, Libya, Iran, that do such blue collar things as pay money to folks that blow people up, but that we talk about the white collar rogue States, those that provide for the bank secrecy and the money laundering and the stuff that can be done in offices without ever getting one's hands dirty.
Another issue, and again I want to stressI think of each of these as likely to be a bad idea at this pointis that we move toward a computerized identity card, with fingerprints, with a magnetic strip on the back, with offsite computers.
I will point out to the fact that we are not serious about dealing with terrorism, but we are very serious about making sure that we don't have credit card fraud. And you can certainly buy phony passports a lot cheaper and use them a lot easier than you can buy a hamburger at a coffee shop and avoid paying for it by using a phony credit card.
Page 73 PREV PAGE TOP OF DOC And, in fact, if you did use a stolen credit card or a forged credit card, there are whole computer systems designed to bring that to law enforcement attention within hours.
And finally, and I oppose this, but I would like to hear you comment about it, is the idea of legalizing drugs, the idea being that under appropriate government control, it is argued that drug usage would not increase, but the profits would be squeezed out, and that we, in fact, face two scourges from drugs: One, the terrible damage done to our social fabric by the drugs themselves; but the other, arguably of equal significance, and that is the terrible harm done to our society by drug profits in the hands of criminals.
So I think my time has expired. I don't know if the chairman wants to allocate more time for oral answers or whether we will rely on written answers.
Chairman GILMAN. By all means, I would welcome the panelists responding.
Mr. DE BORCHGRAVE. Well, off the top of the head, sir, top-of-the-head answers, and I would be delighted to submit something in writing after due reflection, it seems to me that we are wasting an awful lot of money on weapons that are not going to be used and not enough on information warfare, which, to my way of thinking, is the future. I think less than 1 percent of our defense budget today goes toward information warfare.
Insofar as national sovereignty is concerned and money laundering and things of that nature, it seems to me that Presidential Decision Directive No. (PPD) 42 issued by President Clinton in the fall of 1995you may recall at the time the nub of his U.N. speech for the fifth anniversary of the world body concerned transnational crimeif you read PDD 42, it says we should be negotiating the closing down of money laundering centers, about 55 of them around the world, and if our negotiations are not successful, we should then take them out of the American financial loop.
Well, there is no such animal as an American financial loop. There is a global financial loop. I visited Merrill Lynch not long ago, and in 1 day they took in $300 million of new money from around the world. That means about $100 billion a year.
Page 74 PREV PAGE TOP OF DOC What do national regulators really mean in that context of cyberspace?
Oh, incidentally, about drugs, sir, I couldn't disagree more. I am afraid that from everything I have studied, and we do have a task force dealing with this, which we will be issuing a report in the next few months, I am afraid that legalization would turn us into a nation of zombies.
Mr. SHERMAN. I want to stress, I am on that side of that issue as well. I just wanted your comments.
Chairman GILMAN. Dr. Shelley.
Ms. SHELLEY. I think it is important, when we think about organized crime, to think of it as organized crime with a big ''O'' and a big ''C'' and organized crime with a little ''O'' and a little ''C.'' And when we are talking about borders, the physical borders that we are protecting, it becomes a question of how many people we want to let into the country. But the big organized crime, the one with the capital ''O'' and ''C,'' are not usually the individuals that come across physical borders. They are the ones who are able to buy the passports, buy visas, benefit from the holes in the system, through front companies that they set up in this country or elsewhere that give them financial status, that allows them to get access to this country and even acquire green cards to stay here.
But to get at this kind of crime, false front companies, illegal movement of capital, takes a lot of work and a lot of investigation. It is not as simple as putting somebody up to guard a border. It takes a much more clear understanding of the international financial systems and how these criminals are manipulating them.
And if we are going to be putting resources into this area, I think we should be concentrating on the largest elements of the financial system, the organized crime with the ''O'' and the ''C,'' and how we are dealing with the large actors who are moving their money and themselves across systems without problems.
Page 75 PREV PAGE TOP OF DOC Mr. BLUM. I think
Chairman GILMAN. Mr. Blum.
Mr. BLUM. I think that legalizing drugs indeed is a terrible idea, and if you want some idea of what happens in a legal environment with a botanical narcotic, look at the trouble we are having with tobacco. I think it tells you everything you need to know.
In Pakistan, heroin is de facto legal, and the growth of the use of heroin is exponential. I think it is a ghastly idea, and I think exactly the way you do.
The fixed border issue, again, Dr. Shelley has said it exactlyall the wrong people get across the border automatically. The people we keep out with fixed border defenses are the poorest, the least able, the least capable, who are coming here desperately looking for a bottom-end job. The serious criminals are here.
Mr. SHERMAN. Mr. Blum, I was focusing there on moving drugs across borders. I realize that organized criminals can get forged passports.
Mr. BLUM. They just zoom through. And as far as controlling the flow of goods, all you have to do is look at the container movements and realize that Customs can't look at but one-tenth of 1 percent of the containers, and if they tried to look at more, international trade would freeze. So we are really not going to be able to solve the problem that way.
Now, I think that the issue that is really overlooked is the legal cooperation issue, the standardization issue, and the establishment of appropriate norms of behavior, which is what we are going to have to sit down and do.
People in the international business community can't begin to think that it is legal once you get outside the country and you can do anything you want; that you can operate in an environment where no law applies. There has to be application of law everywhere. You can't say, I am going to incorporate myself in the Bahamas, and now I can go do any kind of criminal activity using that corporate front and expect to get away with it. That has to be wrong from the perspective of the United States, from the perspective of the Bahamas, from the perspective of Western Europe.
Page 76 PREV PAGE TOP OF DOC These companies should not be recognized. Banks that are chartered in those places should not be recognized, period. And that will have to come not unilaterally from the United States, but by agreement among all of the major developed countries; by agreement with major international institutions, the Bank for International Settlements and the Central Bankers. That is the kind of tack we are going to have to take.
Chairman GILMAN. Mr. Sherman, any further questions?
Mr. SHERMAN. I would just point out that getting international cooperation is going to be extremely difficultthe developed country that doesn't do it reaps all the economic benefits of being the porthole by which dirty money becomes clean money; where somewhat clean money becomes very clean money; and that if we are going to provide our security shield to countries that undermine the security of Americans, we are not going to achieve that international cooperation.
Mr. BLUM. But I think that if you don't ask for it, you don't get it. And I think that leadership in a democratic world that stands up and says, we won't tolerate criminal activity; now how about you, Government of France, are you going to tolerate it? And how about you, Government of Netherlands, are you going to tolerate it? Say that publicly to your people. I think there is a worldwide constituency for bringing this stuff under control.
Chairman GILMAN. Mr. Sherman.
Mr. SHERMAN. That is it.
Chairman GILMAN. I want to thank our panelists for being patient, taking the time to be here. Your expertise is very welcome to our Committee as we try to analyze where we are and what we should be doing on international crime and terrorism.
I hope that you won't restrict yourself to just today's testimony. If you have some more thoughts for our Committee, we would welcome receiving them. And again, we are so pleased to have top-notch experts here on these issues.
Page 77 PREV PAGE TOP OF DOC The Committee has finished its work. Some of our Members may be submitting written questions. We hope you would be kind enough to respond.
Chairman GILMAN. The Committee stands adjourned.
[Whereupon, at 1:10 p.m., the Committee was adjourned.]
A P P E N D I X
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GENERAL JOSE SERRANO INSPECTS CAPTURED RUSSIAN ROCKET-PROPELLED GRENADE (R.P.G.) IN CALI, COLOMBIA, MARCH 1997
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GENERAL JOSE SERRANO, DIRECTOR GENERAL OF THE COLOMBIAN NATIONAL POLICE, INSPECTS CAPTURED F.A.R.C. WEAPONS WHICH CAME FROM RUSSIA SMUGGLED THROUGHH PANAMA INTO NORTHERN COLOMBIA, MARCH 1997
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DIRECTOR GRNERAL OF THE COLOMBIAN NATIONAL POLICE, MAJGEN. JOSE SERRANO INSPECTS CAPTURED RUSSIAN WEAPONS BROUGHT INTO COLOMBIA, APRIL 1997
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DIRECTOR GENERAL OF THE COLOMBIAN NATIONAL POLICE, MAJGEN. JOSE SERRANO INSPECTS CAPTURED RUSSIAN WEAPONS BROUGHT INTO COLOMBIA, APRIL 1997
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CAPTURED F.A.R.C. AMMUNITION FROM RUSSIA. CALI, COLOMBIA, MARCH 1997
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COLOMBIAN NATIONAL POLICE, ANTINARCOTICS AGENTS INSPECT CAPTURED COCAINE LAB WHERE 6 TONS OF AMMUNITION WERE CAPTURED NEARBY IN EARLY OCTOBER 1997
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